cik0001137360-20220930
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PROSPECTUS |
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February
1, 2023 |
Durable
High Dividend ETF DURA
Long/Flat
Trend ETF LFEQ
Morningstar
ESG Moat ETF MOTE
Morningstar
Global Wide Moat ETF MOTG
Morningstar
International Moat ETF MOTI
Morningstar
SMID Moat ETF SMOT
Morningstar
Wide Moat ETF MOAT®
Social
Sentiment ETF BUZZ
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Principal
U.S. Listing Exchange for DURA, MOTE, MOTG, MOTI, SMOT and MOAT: Cboe BZX
Exchange, Inc. |
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Principal
U.S. Listing Exchange for LFEQ and BUZZ: NYSE Arca, Inc. |
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The
U.S. Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense. |
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800.826.2333 vaneck.com
INVESTMENT OBJECTIVE
VanEck®
Durable High Dividend ETF1
(the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the Morningstar®
US Dividend Valuation IndexSM
(the “US Dividend Valuation Index” or the “Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.29 |
% |
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Other
Expenses(a) |
0.00 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.29 |
% |
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(a)Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least February 1,
2024.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
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YEAR |
EXPENSES |
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1 |
$30 |
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3 |
$93 |
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5 |
$163 |
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10 |
$368 |
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
50% of the average value of its
portfolio.
______________________
1
Prior
to September 28, 2022, the Fund's name was VanEck
Morningstar
Durable Dividend ETF.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities that
comprise the Fund’s benchmark index. The US Dividend Valuation Index is
comprised of securities of companies with a high dividend yield, strong
financial health and an attractive uncertainty-adjusted valuation. Companies are
selected by Morningstar, Inc. (“Morningstar” or the “Index provider”) from the
universe of companies represented in the Morningstar®
US Market IndexSM
(the “Parent Index”), a broad market index representing 97% of U.S. market
capitalization that meet certain trading frequency, exchange listing and
liquidity requirements. The US Dividend Valuation Index targets a select group
of eligible securities from the Parent Index that rank in: (i) the top 50% as
measured by trailing twelve month dividend yield; (ii) the top 50% of their peer
group (there are two peer groups: companies that belong to the financials sector
of Morningstar and the rest of the eligible universe) as measured by its
distance to default score; and (iii) the top 70% of Morningstar’s star score
metric. An eligible security must meet each of these three independent criteria
to qualify for inclusion in the US Dividend Valuation Index. Distance to default
score is a measure of the financial stability of a company as determined by
recent market data and financial accounting reports. Morningstar’s star score
metric represents uncertainty-adjusted security valuation, which reflects the
relationship between a company’s market price and its fair value (as determined
by Morningstar’s standardized, proprietary valuation model).
As
of December 31, 2022, the US Dividend Valuation Index included 63 securities of
companies with a full market capitalization range of between approximately $2.7
billion and $461.8 billion and a weighted average full market capitalization of
$148.3 billion. These amounts are subject to change. The Fund’s 80% investment
policy is non-fundamental and may be changed without shareholder approval upon
60 days’ prior written notice to shareholders. The US Dividend Valuation Index
is reconstituted and rebalanced semi-annually.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the US Dividend Valuation Index by investing in a
portfolio of securities that generally replicates the US Dividend Valuation
Index. Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the US Dividend Valuation Index
and does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the US Dividend Valuation
Index.
The
Fund may become “non-diversified” as defined under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), solely as a result of a
change in relative market capitalization or index weighting of one or more
constituents of the US Dividend Valuation Index. This means that the Fund may
invest a greater percentage of its assets in a limited number of issuers than
would be the case if the Fund were always managed as a diversified management
investment company. The Fund intends to be diversified in approximately the same
proportion as the US Dividend Valuation Index. Shareholder approval will not be
sought when the Fund crosses from diversified to non-diversified status due
solely to a change in the relative market capitalization or index weighting of
one or more constituents of the US Dividend Valuation Index.
The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the US Dividend Valuation Index concentrates in an industry or group of
industries. As of September 30, 2022, each of the health care, information
technology and consumer staples sectors represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a deposit with a bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Equity Securities Risk.
The value of the equity securities held by the Fund may fall due to general
market and economic conditions, perceptions regarding the markets in which the
issuers of securities held by the Fund participate, or factors relating to
specific issuers in which the Fund invests. Equity securities are subordinated
to preferred securities and debt in a company’s capital structure with respect
to priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Dividend Paying Securities Risk.
There can be no assurance that securities that pay dividends will continue to
have a high dividend yield, strong financial health or attractive valuation for
any period of time. Securities that pay dividends, as a group, may be out of
favor with the market and may underperform the overall equity market or stocks
of companies that do not pay dividends. In addition, changes in the dividend
policies of the companies held by the Fund or the capital resources available
for such company’s dividend payments may adversely affect the Fund.
Health
Care Sector Risk. Companies
in the health care sector may be affected by extensive government regulation,
restrictions on government reimbursement for medical expenses, rising costs of
medical products and services, pricing pressure, an increased emphasis on
outpatient services, limited number of products, industry innovation, changes in
technologies and other market developments. Many health care companies are
heavily dependent on patent protection. The expiration of patents may
adversely
affect the profitability of these companies. Many health care companies are
subject to extensive litigation based on product liability and similar claims.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Consumer Staples Sector
Risk. The consumer staples sector comprises
companies whose businesses are less sensitive to economic cycles, such as
manufacturers and distributors of food and beverages and producers of
non-durable household goods and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide economy, consumer spending, competition, demographics
and consumer preferences, exploration and production spending. Companies in this
sector are also affected by changes in government regulation, world events and
economic conditions.
Medium-Capitalization
Companies Risk.
Medium-capitalization companies may be more volatile and more likely than
large-capitalization companies to have narrower product lines, fewer financial
resources, less management depth and experience and less competitive strength.
In addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. Returns on
investments in securities of medium-capitalization companies could trail the
returns on investments in securities of large-capitalization
companies.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
High
Portfolio Turnover Risk.
The Fund may engage in active and frequent trading of its portfolio securities,
which will result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of the securities and on reinvestment in other securities. High portfolio
turnover may also result in higher taxes when Fund Shares are held in a taxable
account. The effects of high portfolio turnover may adversely affect Fund
performance.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (to the extent the Fund effects creations and redemptions in
cash) raising cash to meet redemptions or deploying cash in connection with
newly created Creation Units. Transaction costs, including brokerage costs, will
decrease the Fund’s net asset value to the extent not offset by the transaction
fee payable by an Authorized Participant.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards, a lack of liquidity in markets in which such securities
trade, potential adverse tax consequences or other regulatory reasons (such as
diversification requirements). To the extent the Fund utilizes depositary
receipts, the purchase of depositary receipts may negatively affect the Fund’s
ability to track the performance of the Index and increase tracking error,
which
may be exacerbated if the issuer of the depositary receipt discontinues issuing
new depositary receipts or withdraws existing depositary receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk. The
Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk.
There can be no assurance that an active trading market for the Shares will
develop or be maintained, as applicable. Further, secondary markets may be
subject to irregular trading activity, wide bid/ask spreads and extended trade
settlement periods in times of market stress because market makers and
Authorized Participants may step away from making a market in the Shares and in
executing creation and redemption orders, which could cause a material deviation
in the Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in
stressed
market conditions, the market for the Fund’s Shares may become less liquid in
response to deteriorating liquidity in the markets for the Fund’s underlying
portfolio holdings and a shareholder may be unable to sell his or her Shares.
Non-Diversification
Risk.
The Fund may become classified as
“non-diversified” under the Investment Company Act of 1940 solely as a result of
a change in relative market capitalization or index weighting of one or more
constituents of the its Index. If the Fund becomes non-diversified, it may
invest a greater portion of its assets in securities of a smaller number of
individual issuers than a diversified fund. As a result, changes in the market
value of a single investment could cause greater fluctuations in share price
than would occur in a more diversified
fund.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a
particular sector or sectors or industry or group of industries to reflect the
Index’s allocation to those types of securities. The securities of many or all
of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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Best
Quarter: |
17.00% |
4Q 2022 |
Worst
Quarter: |
-19.90% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past One
Year |
Since
Inception (10/30/18) |
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VanEck Durable High Dividend ETF
(return before taxes) |
2.47% |
9.19% |
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VanEck Durable High Dividend ETF
(return after taxes on distributions) |
1.72% |
8.30% |
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VanEck Durable High Dividend ETF
(return after taxes on distributions and sale of Fund
Shares) |
1.95% |
7.07% |
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Morningstar®
US
Dividend Valuation IndexSM
(reflects no deduction for
fees, expenses or taxes) |
2.78% |
9.50% |
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
-18.11% |
10.90% |
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See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
October
2018 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Long/Flat Trend ETF (the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the Ned Davis Research CMG US Large Cap Long/Flat
Index (the “NDR CMG Index” or the “Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder Fees (fees paid directly from
your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.50 |
% |
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Other
Expenses |
0.22 |
% |
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Acquired
Fund Fees and Expenses(a) |
0.02 |
% |
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Total
Annual Fund Operating Expenses(b) |
0.74 |
% |
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Fee
Waivers and Expense Reimbursement(b) |
-0.13 |
% |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(b) |
0.61 |
% |
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(a)
“Acquired Fund Fees and
Expenses” include fees and expenses incurred indirectly by the Fund as a result
of investments in other investment companies. Because acquired fund fees and
expenses are not borne directly by the Fund, they will not be reflected in the
expense information in the Fund’s financial statements and the information
presented in the table will differ from that presented in the Fund’s financial
highlights included in the Fund’s report to
shareholders.
(b) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.55% of the Fund’s average daily net
assets per year until at least February 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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|
YEAR |
EXPENSES |
|
|
1 |
$62 |
|
|
|
3 |
$223 |
|
|
|
5 |
$399 |
|
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|
10 |
$906 |
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
243% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities that track
and/or comprise the Fund’s benchmark index. The NDR CMG Index is a rules-based
index that follows a proprietary model developed by Ned Davis Research, Inc. in
conjunction with CMG Capital Management Group, Inc. (“CMG”). To help limit
potential loss associated with adverse market conditions, the model produces
trade signals that dictate the NDR CMG Index’s equity allocation ranging from
100% fully invested (i.e.,
“long”) to 100% in cash (i.e.,
“flat”). When the NDR CMG Index is long, or 100% fully invested, it will be
allocated to the S&P 500 Index. When the NDR CMG Index is flat, or 100%
cash, it will be allocated to the Solactive 13-week U.S. T-bill Index. When the
NDR CMG Index is not completely long or flat, 50% of it will be allocated to the
S&P 500 Index, with the remaining 50% allocated to the Solactive 13-week
U.S. T-bill Index. The Fund currently seeks to replicate the NDR CMG Index when
the NDR CMG Index has any equity allocation (as discussed further below) by
holding shares of one or more exchange-traded funds (“ETFs”) whose investment
objective is to track the performance of the S&P 500 Index, rather than
investing directly in the shares of the 500 companies comprising the S&P 500
Index, until the Fund reaches, in the opinion of the Adviser, an adequate asset
size. When the Fund reaches an adequate size and the NDR CMG Index has an equity
allocation, the Fund may then seek to replicate the NDR CMG Index by investing
directly in the shares of the 500 companies comprising the S&P 500 Index.
The Solactive 13-week U.S. T-bill Index invests in one 13-week U.S. Treasury
bill at a time, and a maximum of five U.S. Treasury bills in a calendar year.
The Fund will track the most recent 13-week U.S. Treasury bill exposure in the
Solactive 13-week U.S. T-bill Index to follow the NDR CMG Index’s flat, or cash,
allocations.
The
model produces daily trade signals to determine the NDR CMG Index’s equity
allocation percentage through a two-phase process. The first phase produces an
industry-level market breadth composite based on the S&P 500 industry
groupings. As such, “market breadth” here refers to the aggregated weighted
score of advancing and declining industries, as measured by three types of
price-based, industry-level indicators: trend-following, volatility and
mean-reversion. Trend-following primary indicators include momentum and various
moving average measures to assess the current direction of the markets.
Mean-reversion indicators are applied, which are based on the theory that prices
and returns eventually move back towards their historical mean (or average). The
volatility indicators determine whether near-term volatility has significantly
risen relative to longer-term volatility to measure whether broad market risks
have risen. The model applies these indicators across the S&P 500 industry
groupings to ultimately produce trade signals that are either bullish (meaning
prices are expected to increase over time) or bearish (meaning prices are
expected to decrease over time). The final market breadth composite is the
scaled aggregation of these indicators across the S&P 500 industries to
determine the breadth composite score (between 0 and 100). The second phase
utilizes the breadth composite score to produce the equity allocations for the
NDR CMG Index. The model is automated and updates daily to take into account the
various indicators that dictate the trade signals referenced above. As such, the
NDR CMG Index may rebalance to new allocation percentages intra-month based on
the model’s composite score and direction, and the Fund may seek to rebalance
its allocation percentage level accordingly. In addition, the NDR CMG Index’s
underlying indices (the S&P 500 Index and the Solactive 13-Week U.S. T-Bill
Index) are each rebalanced on a quarterly basis. The overall composition of the
NDR CMG Index is subject to change. The Fund’s 80% investment policy is
non-fundamental and may be changed without shareholder approval upon 60 days’
prior written notice to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the NDR CMG Index by investing in a portfolio of
securities that generally replicates the NDR CMG Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the NDR CMG Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the NDR CMG Index.
The
Fund may become "non-diversified" as defined under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), solely as a result of a
change in relative market capitalization or index weighting of one or more
constituents of the NDR CMG Index. This means that the Fund may invest a greater
percentage of its assets in a limited number of issuers than would be the case
if the Fund were always managed as a diversified management investment company.
The Fund intends to be diversified in approximately the same proportion as the
NDR CMG Index. Shareholder approval will not be sought when the Fund crosses
from diversified to non-diversified status due solely to a change in the
relative market capitalization or index weighting of one or more constituents of
the NDR CMG Index.
The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the NDR CMG Index concentrates in an industry or group of industries. The degree
to which certain sectors or industries are represented in the NDR CMG Index will
change over time.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a deposit with a bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Equity Securities Risk.
The value of the equity securities held by the Fund may fall due to general
market and economic conditions, perceptions regarding the markets in which the
issuers of securities held by the Fund participate, or factors relating to
specific issuers in which the Fund invests. Equity securities are subordinated
to preferred securities and debt in a company’s capital structure with respect
to priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those
returns.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (to the extent the Fund effects creations and redemptions in
cash) raising cash to meet redemptions or deploying cash in connection with
newly created Creation Units. Transaction costs, including brokerage costs, will
decrease the Fund’s net asset value to the extent not offset by the transaction
fee payable by an Authorized Participant.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards, a lack of liquidity in markets in which such securities
trade, potential adverse tax consequences or other regulatory reasons (such as
diversification requirements). To the extent the Fund utilizes depositary
receipts, the purchase of depositary receipts may negatively affect the Fund’s
ability to track the performance of the Index and increase tracking error, which
may be exacerbated if the issuer of the depositary receipt discontinues issuing
new depositary receipts or withdraws existing depositary receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Risk
of Investing in Other Funds. The
Fund may invest in shares of other funds, including ETFs. As a result, the Fund
will indirectly be exposed to the risks of an investment in the underlying
funds. As a shareholder in a fund, the Fund would bear its ratable share of that
entity’s expenses. At the same time, the Fund would continue to pay its own
investment management fees and other expenses. As a result, the Fund and its
shareholders will be absorbing additional levels of fees with respect to
investments in other funds, including ETFs.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
U.S.
Treasury Bills Risk.
Direct obligations of the U.S. Treasury have historically involved little risk
of loss of principal if held to maturity. However, due to fluctuations in
interest rates, the market value of such securities may vary.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
High
Portfolio Turnover Risk. The
Fund may engage in active and frequent trading of its portfolio securities,
which will result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of the securities and on reinvestment in other securities. High portfolio
turnover may also result in higher taxes when Fund Shares are held in a taxable
account. The effects of high portfolio turnover may adversely affect Fund
performance.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
No
Guarantee of Active Trading Market Risk.
There can be no assurance that an active trading market for the Shares will
develop or be maintained, as applicable. Further, secondary markets may be
subject to irregular trading activity, wide bid/ask spreads and extended trade
settlement periods in times of market stress because market makers and
Authorized Participants may step away from making a market in the Shares and in
executing creation and redemption orders, which could cause a material deviation
in the Fund’s market price from its net asset value.
Authorized
Participant Concentration Risk. The
Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Non-Diversification
Risk. The Fund may become classified
as “non-diversified” under the Investment Company Act of 1940 solely as a result
of a change in relative market capitalization or index weighting of one or more
constituents of the its Index. If the Fund becomes non-diversified, it may
invest a greater portion of its assets in securities of a smaller number of
individual issuers
than a diversified fund. As a result,
changes in the market value of a single investment could cause greater
fluctuations in share price than would occur in a more diversified
fund.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a
particular sector or sectors or industry or group of industries to reflect the
Index’s allocation to those types of securities. The securities of many or all
of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
|
|
|
|
|
|
|
|
|
Best
Quarter: |
19.97 |
% |
2Q 2020 |
Worst
Quarter: |
-19.67 |
% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past One
Year |
Past Five
Years |
Since
Inception (10/4/17) |
|
|
VanEck Long/Flat Trend ETF (return
before taxes) |
-21.98% |
6.73% |
7.37% |
|
|
VanEck Long/Flat Trend ETF (return
after taxes on distributions) |
-22.25% |
6.39% |
7.04% |
|
|
VanEck Long/Flat Trend ETF (return
after taxes on distributions and sale of Fund
Shares) |
-12.90% |
5.24% |
5.77% |
|
|
Ned Davis Research CMG US Large Cap
Long/Flat Index (reflects no deduction for
fees, expenses or taxes) |
-21.35% |
7.36% |
8.05% |
|
|
S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
-18.11% |
9.42% |
10.16% |
|
|
|
|
|
|
|
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser. Van
Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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|
Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
|
Peter
H. Liao |
Portfolio
Manager |
October
2017 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck Morningstar ESG Moat ETF (the
“Fund”) seeks to track as closely as possible, before fees and expenses, the
price and yield performance of the Morningstar®
US
Sustainability Moat Focus IndexSM
(the “US Sustainability Moat Focus Index” or the
“Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
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|
Shareholder
Fees
(fees paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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|
Management
Fee |
0.45 |
% |
|
|
Other
Expenses |
3.79 |
% |
|
|
Total
Annual Fund Operating Expenses |
4.24 |
% |
|
|
Fee
Waivers and Expense Reimbursement(a) |
-3.75 |
% |
|
|
Total
Annual Fund Operating Expenses(a) |
0.49 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.49% of the Fund’s average daily net
assets per year until at least February 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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|
YEAR
|
EXPENSES |
|
|
1 |
$50 |
|
|
|
3 |
$943 |
|
|
|
5 |
$1,850 |
|
|
|
10 |
$4,177 |
|
|
|
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the period from October 5, 2021 (the Fund's commencement of operations) through
September 30, 2022, the Fund’s portfolio turnover rate was 44% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The US Sustainability Moat Focus Index provides exposure to attractively
valued companies with long-term competitive advantages while excluding those
companies with high environmental, social and governance (”ESG”) risks. The US
Sustainability Moat Focus Index is comprised of securities issued by U.S.
companies that Morningstar, Inc. (“Morningstar” or the “Index provider”)
determines to have long-term competitive advantages based on a proprietary
methodology that considers quantitative and qualitative factors
(“wide
moat companies”). The quantitative factors used by Morningstar to identify
competitive advantages currently include historical and projected returns on
invested capital relative to cost of capital. The qualitative factors used by
Morningstar to identify competitive advantages currently include customer
switching cost (i.e.,
the costs of customers switching to competitors), internal cost advantages,
intangible assets (e.g.,
intellectual property and brands), network effects (i.e.,
whether products or services become more valuable as the number of customers
grows) and efficient scale (i.e.,
whether the company effectively serves a limited market that potential rivals
have little incentive to enter into). Wide moat companies are selected from the
universe of companies represented in the Morningstar®
US Market IndexSM,
a broad market index representing 97% of U.S. market capitalization. The US
Sustainability Moat Focus Index excludes from consideration those wide moat
companies that receive a severe or high ESG risk rating based on Morningstar’s
Sustainalytics ESG Risk Rating. The US Sustainability Moat Focus Index also
excludes companies (i) involved in the production or distribution of
controversial weapons or civilian firearms (ii) involved in the extraction of or
generation of power from thermal coal, (iii) have a Sustainalytics controversy
score of five (out of a scale of 1 to 5) in the last three (3) years, (iv) those
that have a severe or high Carbon Risk Rating from Sustainalytics or (v) that
have greater than 50% of revenues from tobacco products. The Sustainalytics
company-level ESG Risk Score measures the degree to which a company's economic
value may be at risk driven by materially relevant ESG factors. The ESG Risk
Score is based on a two-dimensional materiality framework that measures a
company's exposure to subindustry-specific material risks and how well a company
is managing those risks. ESG Risk Scores are categorized across five risk
levels: negligible, low, medium, high and severe. The scale is from 0-100, with
100 being the most severe. Sustainalytics controversy scores are determined
based on ESG-related incidents, which are assessed through a framework that
considers the severity of incidents, the corporation’s accountability and
whether the incidents form part of a pattern of corporate misconduct; a
Sustainalytics controversy score of five indicates a severe controversy rating.
Sustainalytics Carbon Risk Ratings assess a company’s carbon risk by evaluating
the company’s material exposure to and management of carbon issues.
The
US Sustainability Moat Focus Index targets wide moat companies that according to
Morningstar’s equity research team are attractively priced as of each US
Sustainability Moat Focus Index review. Morningstar selects eligible companies
to be included in the US Sustainability Moat Focus Index as determined by
Morningstar’s standardized, proprietary valuation model that predominantly
relies on a detailed projection of a company’s future cash flows. Wide moat
companies may include medium-capitalization companies. The Fund’s 80% investment
policy is non-fundamental and may be changed without shareholder approval upon
60 days’ prior written notice to shareholders.
As
of December 31, 2022, US Sustainability Moat Focus Index included 62 securities
of companies with a full market capitalization range of between approximately
$1.9 billion and $1,787.7 billion and a weighted average full market
capitalization of $110.2 billion. The US Sustainability Moat Focus Index employs
a staggered rebalance methodology. The US Sustainability Moat Focus Index is
divided into two equally-weighted sub-portfolios, and each is reconstituted and
rebalanced annually, one in June and the other in December.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the US Sustainability Moat Focus Index by
investing in a portfolio of securities that generally tracks the US
Sustainability Moat Focus Index. Unlike many investment companies that try to
“beat” the performance of a benchmark index, the Fund does not try to “beat” the
US Sustainability Moat Focus Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
track the US Sustainability Moat Focus Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”) and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the US Sustainability Moat Focus Index concentrates in an industry or group of
industries. As of September 30, 2022, each of the information technology,
consumer staples, financials and consumer discretionary sectors represented a
significant portion of the Fund.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a deposit with a bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
ESG
Investing Strategy Risk. The
Fund’s ESG strategy could cause it to perform differently compared to funds that
do not have an ESG focus. The Fund’s ESG strategy may result in the Fund
investing in securities or industry sectors that underperform other securities
or underperform the market as a whole. The companies included in the US
Sustainability Moat Focus Index may differ from companies included in other
indices that use similar ESG screens. The Fund is also subject to the risk that
the companies identified by the Index provider do not operate as expected when
addressing ESG issues. Additionally, the Index provider’s proprietary valuation
model may not perform as intended, which may adversely affect an investment in
the Fund. Regulatory changes or interpretations regarding the definitions and/or
use of ESG criteria could have a material adverse effect on the Fund’s ability
to implement its ESG strategy.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those
returns.
Medium-Capitalization
Companies Risk.
Medium-capitalization companies may be more volatile and more likely than
large-capitalization companies to have narrower product lines, fewer financial
resources, less management depth and experience and less competitive strength.
In addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. Returns on
investments in securities of medium-capitalization companies could trail the
returns on investments in securities of large-capitalization
companies.
Consumer Discretionary Sector
Risk. The consumer discretionary sector comprises
companies whose businesses are sensitive to economic cycles, such as
manufacturers of high-end apparel and automobile and leisure companies.
Companies in the consumer discretionary sector are subject
to fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Consumer Staples Sector
Risk.
The consumer staples sector comprises companies whose
businesses are less sensitive to economic cycles, such as manufacturers and
distributors of food and beverages and producers of non-durable household goods
and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide economy, consumer spending, competition, demographics
and consumer preferences, exploration and production spending. Companies in this
sector are also affected by changes in government regulation, world events and
economic conditions.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
High
Portfolio Turnover Risk. The
Fund may engage in active and frequent trading of its portfolio securities,
which will result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of the securities and on reinvestment in other securities. High portfolio
turnover may also result in higher taxes when Fund Shares are held in a taxable
account. The effects of high portfolio turnover may adversely affect Fund
performance.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (to the extent the Fund effects creations and redemptions in
cash) raising cash
to
meet redemptions or deploying cash in connection with newly created Creation
Units. Transaction costs, including brokerage costs, will decrease the Fund’s
net asset value to the extent not offset by the transaction fee payable by an
Authorized Participant.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards, a lack of liquidity in markets in which such securities
trade, potential adverse tax consequences or other regulatory reasons (such as
diversification requirements). To the extent the Fund utilizes depositary
receipts, the purchase of depositary receipts may negatively affect the Fund’s
ability to track the performance of the Index and increase tracking error, which
may be exacerbated if the issuer of the depositary receipt discontinues issuing
new depositary receipts or withdraws existing depositary receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk. The
Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in Shares on the Exchange may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the Exchange’s “circuit
breaker” rules. There can be no assurance that the requirements of the Exchange
necessary to maintain the listing of the Fund will continue to be met or will
remain unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate
or
a diversified mix of securities for any particular economic cycle. The timing of
changes in the securities of the Fund’s portfolio in seeking to replicate its
Index could have a negative effect on the Fund. Unlike with an actively managed
fund, the Adviser does not use techniques or defensive strategies designed to
lessen the effects of market volatility or to reduce the impact of periods of
market decline. Additionally, unusual market conditions may cause the Fund’s
Index provider to postpone a scheduled rebalance or reconstitution, which could
cause the Fund’s Index to vary from its normal or expected composition. This
means that, based on market and economic conditions, the Fund’s performance
could be lower than funds that may actively shift their portfolio assets to take
advantage of market opportunities or to lessen the impact of a market decline or
a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares.
The market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if its Index is
comprised of securities of a limited number of companies.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a
particular sector or sectors or industry or group of industries to reflect the
Index’s allocation to those types of securities. The securities of many or all
of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Year
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Best
Quarter: |
10.68 |
% |
4Q 2022 |
Worst
Quarter: |
-12.89 |
% |
2Q
2022 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past One
Year |
Since
Inception (10/05/2021) |
|
|
VanEck Morningstar ESG Moat ETF (return
before taxes) |
-18.61% |
-9.63% |
|
|
VanEck Morningstar ESG Moat ETF (return
after taxes on distributions) |
-18.80% |
-9.83% |
|
|
VanEck Morningstar ESG Moat ETF (return
after taxes on distributions and sale of Fund
Shares) |
-10.88% |
-7.31% |
|
|
Morningstar®
US
Sustainability Moat Focus IndexSM
(reflects no deduction for
fees, expenses or taxes) |
-18.20% |
-9.20% |
|
|
S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
-18.11% |
-8.07% |
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|
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
|
Peter
H. Liao |
Portfolio
Manager |
October
2021 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck Morningstar Global Wide Moat
ETF
(the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the Morningstar®
Global Wide Moat Focus IndexSM
(the “Global Wide Moat Focus Index” or the
“Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
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|
Shareholder
Fees
(fees paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.45 |
% |
|
|
|
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|
Other
Expenses |
0.51 |
% |
|
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|
|
|
Total
Annual Fund Operating Expenses(a) |
0.96 |
% |
|
|
Fee
Waivers and Expense Reimbursement(a) |
-0.44 |
% |
|
|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.52 |
% |
|
|
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|
|
(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.52% of the Fund’s average daily net
assets per year until at least February 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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|
YEAR |
EXPENSES |
|
|
1 |
$53 |
|
|
|
3 |
$262 |
|
|
|
5 |
$488 |
|
|
|
10 |
$1,138 |
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
67% of the average value of its
portfolio.
PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The Global Wide Moat Focus Index is comprised of securities issued by
companies that Morningstar, Inc. (“Morningstar” or the “Index provider”)
determines to have sustainable competitive advantages based on a proprietary
methodology that considers quantitative
and
qualitative factors (“wide moat companies”). The quantitative factors used by
Morningstar to identify competitive advantages currently include historical and
projected returns on invested capital relative to cost of capital. The
qualitative factors used by Morningstar to identify competitive advantages
currently include customer switching cost (i.e.,
the costs of customers switching to competitors), internal cost advantages,
intangible assets (e.g.,
intellectual property and brands), network effects (i.e.,
whether products or services become more valuable as the number of customers
grows) and efficient scale (i.e.,
whether the company effectively serves a limited market that potential rivals
have little incentive to enter into). Wide moat companies are selected by
Morningstar from the universe of companies represented in the
Morningstar®
Global Markets IndexSM
(the “Parent Index”) a broad market index representing 97% of developed and
emerging market capitalization that meet certain trading frequency, dollar
trading volume and turnover and free-float market-capitalization requirements.
The Global Wide Moat Focus Index targets a select group of wide moat companies:
those that according to Morningstar’s equity research team are attractively
priced as of each Global Wide Moat Focus Index review. Morningstar utilizes a
momentum screen, in which momentum represents a security’s 12-month price
change. The momentum screen is used to exclude 20% of wide moat companies in the
Parent Index with the worst 12-month momentum based on a 12-month price change
of each company’s securities. Out of the companies in the Parent Index that
Morningstar determines are wide moat companies and display 12-month momentum in
the top 80%, Morningstar selects companies to be included in the Global Wide
Moat Focus Index as determined by the ratio of Morningstar’s estimate of fair
value of the issuer’s common stock to the price. Morningstar’s equity research
fair value estimates are calculated using a standardized, proprietary valuation
model that predominantly relies on a detailed projection of a company’s future
cash flows. Wide moat companies may include medium-capitalization companies. The
Fund, under normal market conditions, will invest at least 40% of its assets in
companies organized or located in multiple countries outside the United States
or doing a substantial amount of business in multiple countries outside the
United States. The Fund’s 80% investment policy is non-fundamental and may be
changed without shareholder approval upon 60 days’ prior written notice to
shareholders.
As
of December 31, 2022, the Global Wide Moat Focus Index included 68 securities of
companies with a market capitalization range of between approximately $3.1
billion and $1,787.7 billion and a weighted average full market capitalization
of $121.9 billion. The maximum weight of an individual country or sector in the
Global Wide Moat Focus Index is capped at 10% more than its corresponding weight
in the parent index at the time of reconstitution, or 40%, whichever is higher.
The Global Wide Moat Focus Index is divided into two equally weighted
sub-portfolios, and each is reconstituted and rebalanced semi-annually on
alternating quarters.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Global Wide Moat Focus Index by investing in a
portfolio of securities that generally replicates the Global Wide Moat Focus
Index. Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Global Wide Moat Focus
Index and does not seek temporary defensive positions that are inconsistent with
its investment objective of seeking to replicate the Global Wide Moat Focus
Index.
The
Fund may become “non-diversified” as defined under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), solely as a result of a
change in relative market capitalization or index weighting of one or more
constituents of the Global Wide Moat Focus Index. This means that the Fund may
invest a greater percentage of its assets in a limited number of issuers than
would be the case if the Fund were always managed as a diversified management
investment company. The Fund intends to be diversified in approximately the same
proportion as the Global Wide Moat Focus Index. Shareholder approval will not be
sought when the Fund crosses from diversified to non-diversified status due
solely to a change in the relative market capitalization or index weighting of
one or more constituents of the Global Wide Moat Focus Index.
The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Global Wide Moat Focus Index concentrates in an industry or group of
industries. As of September 30, 2022, each of the information technology,
consumer staples, financials, industrials and health care sectors represented a
significant portion of the Fund.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a deposit with a bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Equity Securities Risk.
The value of the equity securities held by the Fund may fall due to general
market and economic conditions, perceptions regarding the markets in which the
issuers of securities held by the Fund participate, or factors relating to
specific issuers in which the Fund invests. Equity securities are subordinated
to preferred securities and debt in a company’s capital structure with respect
to priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods.
Companies
in the industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Health
Care Sector Risk.
Companies in the health care sector may be affected by extensive government
regulation, restrictions on government reimbursement for medical expenses,
rising costs of medical products and services, pricing pressure, an increased
emphasis on outpatient services, limited number of products, industry
innovation, changes in technologies and other market developments. Many health
care companies are heavily dependent on patent protection. The expiration of
patents may adversely affect the profitability of these companies. Many health
care companies are subject to extensive litigation based on product liability
and similar claims.
Consumer Staples Sector
Risk.
The consumer staples sector comprises companies whose
businesses are less sensitive to economic cycles, such as manufacturers and
distributors of food and beverages and producers of non-durable household goods
and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide economy, consumer spending, competition, demographics
and consumer preferences, exploration and production spending. Companies in this
sector are also affected by changes in government regulation, world events and
economic conditions.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Medium-Capitalization
Companies Risk.
Medium-capitalization companies may be more volatile and more likely than
large-capitalization companies to have narrower product lines, fewer financial
resources, less management depth and experience and less competitive strength.
In addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. Returns on
investments in securities of medium-capitalization companies could trail the
returns on investments in securities of large-capitalization
companies.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s
investments.
Foreign Currency Risk.
The Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Economic events in any one Asian country can have a
significant effect on the entire Asian region as well as on major trading
partners outside Asia, and any adverse effect on some or all of the Asian
countries and regions in which the Fund invests. The securities markets in some
Asian economies are relatively underdeveloped and may subject the Fund to higher
action costs or greater uncertainty than investments in more developed
securities markets. Such risks may adversely affect the value of the Fund’s
investments.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default
or
threat of default by a European Union member country on its sovereign debt,
and/or an economic recession in an European Union member country may have a
significant adverse effect on the economies of other European Union countries
and on major trading partners outside Europe. If any member country exits the
Economic and Monetary Union, the departing country would face the risks of
currency devaluation and its trading partners and banks and others around the
world that hold the departing country’s debt would face the risk of significant
losses. The European financial markets have previously experienced, and may
continue to experience, volatility and have been adversely affected, and may in
the future be affected, by concerns about economic downturns, credit rating
downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. In a referendum held on June 23,
2016, voters in the United Kingdom voted to leave the European Union, creating
economic and political uncertainty in its wake. On January 31, 2020, the United
Kingdom officially withdrew from the European Union and the United Kingdom
entered a transition period which ended on December 31, 2020. On December 30,
2020, the European Union and United Kingdom signed the EU-UK Trade and
Cooperation Agreement, an agreement on the terms governing certain aspects of
the European Union’s and the United Kingdom’s relationship following the end of
the transition period. Notwithstanding the EU-UK Trade and Cooperation
Agreement, following the transition period, there is likely to be considerable
uncertainty as to the United Kingdom’s post-transition framework.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for in-kind securities. Therefore,
it may be required to sell portfolio securities and subsequently incur brokerage
costs and/or recognize gains or losses on such sales that the Fund might not
have recognized if it were to distribute portfolio securities in kind. As such,
investments in Shares may be less tax-efficient than an investment in a
conventional ETF. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
High
Portfolio Turnover Risk. The
Fund may engage in active and frequent trading of its portfolio securities,
which will result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of the securities and on reinvestment in other securities. High portfolio
turnover may also result in higher taxes when Fund Shares are held in a taxable
account. The effects of high portfolio turnover may adversely affect Fund
performance.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (to the extent the Fund effects creations and redemptions in
cash) raising cash to meet redemptions or deploying cash in connection with
newly created Creation Units. Transaction costs, including brokerage costs, will
decrease the Fund’s net asset value to the extent not offset by the transaction
fee payable by an Authorized Participant.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any
transaction
costs and market exposure arising from such portfolio rebalancing will be borne
directly by the Fund and its shareholders. Apart from scheduled rebalances, the
Index provider or its agents may carry out additional ad hoc rebalances to the
Index. Therefore, errors and additional ad hoc rebalances carried out by the
Index provider or its agents to the Index may increase the costs to and the
tracking error risk of the Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards, a lack of liquidity in markets in which such securities
trade, potential adverse tax consequences or other regulatory reasons (such as
diversification requirements). To the extent the Fund utilizes depositary
receipts, the purchase of depositary receipts may negatively affect the Fund’s
ability to track the performance of the Index and increase tracking error, which
may be exacerbated if the issuer of the depositary receipt discontinues issuing
new depositary receipts or withdraws existing depositary receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares.
The market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversification
Risk.
The Fund may become classified as
“non-diversified” under the Investment Company Act of 1940 solely as a result of
a change in relative market capitalization or index weighting of one or more
constituents of the its Index. If the Fund becomes non-diversified, it may
invest a greater portion of its assets in securities of a smaller number of
individual issuers than a diversified fund. As a result, changes in the market
value of a single investment could cause greater fluctuations in share price
than would occur in a more diversified
fund.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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Best
Quarter: |
20.12 |
% |
2Q 2020 |
Worst
Quarter: |
-18.70 |
% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past One
Year |
Since
Inception (10/30/18) |
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|
VanEck Morningstar Global Wide Moat ETF
(return before taxes) |
-11.34% |
9.76% |
|
|
VanEck Morningstar Global Wide Moat ETF
(return after taxes on distributions) |
-12.08% |
8.67% |
|
|
VanEck Morningstar Global Wide Moat ETF
(return after taxes on distributions and sale of Fund
Shares) |
-6.18% |
7.51% |
|
|
Morningstar®
Global
Wide Moat Focus IndexSM
(reflects no deduction for fees, expenses or taxes, except withholding
taxes) |
-11.05% |
10.07% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
10.90% |
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See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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|
Peter
H. Liao |
Portfolio
Manager |
October
2018 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck Morningstar International Moat
ETF (the “Fund”) seeks to replicate as closely as possible,
before fees and expenses, the price and yield performance of the
Morningstar®
Global ex-US Moat Focus IndexSM
(the “ex-US Moat Focus Index” or the “Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.50 |
% |
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Other
Expenses |
0.17 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.67 |
% |
|
|
Fee
Waivers and Expense Reimbursement(a) |
-0.09 |
% |
|
|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.58 |
% |
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(a)
Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.56% of the Fund’s average daily net
assets per year until at least February 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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YEAR |
EXPENSES |
|
|
1 |
$59 |
|
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3 |
$205 |
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|
5 |
$364 |
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|
10 |
$826 |
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
105% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The ex-US Moat Focus Index is comprised of securities issued by companies
that Morningstar, Inc. (“Morningstar” or the “Index provider”) determines have
sustainable competitive advantages based on a proprietary methodology that
considers quantitative and qualitative factors (“wide and narrow moat
companies”). Wide moat companies are those that Morningstar believes will
maintain its competitive advantage(s) for at least 20 years. Narrow moat
companies are those that Morningstar believes will maintain its
competitive
advantage(s) for at least 10 years. Wide and narrow moat companies are selected
from the universe of companies represented in the Morningstar®
Global Markets ex-US IndexSM
(the “Parent Index”), a broad market index representing 97% of developed ex-US
and emerging markets market capitalization. The ex-US Moat Focus Index targets a
select group of equity securities of wide and narrow moat companies, which are
those companies that, according to Morningstar’s equity research team, are
attractively priced as of each ex-US Moat Focus Index review. Morningstar
utilizes a momentum screen, in which momentum represents a security’s 12-month
price change. A momentum signal is used to exclude 20% of the wide and narrow
moat stocks in the Parent Index with the worst 12-month momentum based on a
12-month price change of each stock. Out of the companies in the Parent Index
that Morningstar determines are wide or narrow moat companies and display
12-month momentum in the top 80%, Morningstar selects companies to be included
in the ex-US Moat Focus Index as determined by the ratio of the issuer’s common
stock price to Morningstar’s estimate of fair value. Morningstar’s fair value
estimates are calculated using standardized, proprietary valuation models. Wide
and narrow moat companies may include medium-capitalization companies. The
Fund’s 80% investment policy is non-fundamental and may be changed without
shareholder approval upon 60 days’ prior written notice to
shareholders.
As
of December 31, 2022, the Global ex-US Moat Focus Index included 69 securities
of companies with a full market capitalization range of between approximately
$1.5 billion and $410 billion and a weighted average full market capitalization
of $39 billion. These amounts are subject to change.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the ex-US Moat Focus Index by investing in a
portfolio of securities that generally replicates the ex-US Moat Focus Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the ex-US Moat Focus Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the ex-US Moat Focus Index.
The
Fund may become "non-diversified" as defined under the Investment Company Act of
1940, as amended (the "Investment Company Act of 1940"), solely as a result of a
change in relative market capitalization or index weighting of one or more
constituents of ex-US Moat Focus Index. This means that the Fund may invest a
greater percentage of its assets in a limited number of issuers than would be
the case if the Fund were always managed as a diversified management investment
company. The Fund intends to be diversified in approximately the same proportion
as the ex-US Moat Focus Index. Shareholder approval will not be sought when the
Fund crosses from diversified to non-diversified status due solely to a change
in the relative market capitalization or index weighting of one or more
constituents of the ex-US Moat Focus Index.
The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the ex-US Moat Focus Index concentrates in an industry or group of industries.
As of September 30, 2022, each of the financials, information technology,
consumer discretionary, communication services and health care sectors
represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a deposit with a bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Communication Services Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the communication services sector.
Companies in the communication services sector may be
affected by industry competition, substantial capital requirements, government
regulations and obsolescence of communications products and services due to
technological advancement.
Consumer Discretionary Sector
Risk. The consumer discretionary sector comprises
companies whose businesses are sensitive to economic cycles, such as
manufacturers of high-end apparel and automobile and leisure companies.
Companies in the consumer discretionary sector are subject
to fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in
the
financials sector may be adversely affected by increases in interest rates, by
loan losses, which usually increase in economic downturns, and by credit rating
downgrades. In addition, the financials sector is undergoing numerous changes,
including continuing consolidations, development of new products and structures
and changes to its regulatory framework. Furthermore, some companies in the
financials sector perceived as benefiting from government intervention in the
past may be subject to future government-imposed restrictions on their
businesses or face increased government involvement in their operations.
Increased government involvement in the financials sector, including measures
such as taking ownership positions in financial institutions, could result in a
dilution of the Fund’s investments in financial institutions.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Health
Care Sector Risk.
Companies in the health care sector may be affected by extensive government
regulation, restrictions on government reimbursement for medical expenses,
rising costs of medical products and services, pricing pressure, an increased
emphasis on outpatient services, limited number of products, industry
innovation, changes in technologies and other market developments. Many health
care companies are heavily dependent on patent protection. The expiration of
patents may adversely affect the profitability of these companies. Many health
care companies are subject to extensive litigation based on product liability
and similar claims.
Medium-Capitalization
Companies Risk.
The Fund may invest in medium-capitalization companies and, therefore will be
subject to certain risks associated with medium- capitalization companies. These
companies are often subject to less analyst coverage and may be in early and
less predictable periods of their corporate existences, with little or no record
of profitability. In addition, these companies often have greater price
volatility, lower trading volume and less liquidity than larger more established
companies. These companies tend to have smaller revenues, narrower product
lines, less management depth and experience, smaller shares of their product or
service markets, fewer financial resources and less competitive strength than
large-capitalization companies. Returns on investments in securities of
medium-capitalization companies could trail the returns on investments in
securities of larger companies.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign Currency Risk.
The Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. The Adviser may be limited in its ability to assess the Index
provider’s due diligence process over Index data prior to its use in Index
computation, construction and/or rebalancing. Additionally, each of the factors
described below could have a negative impact on the Fund’s performance and
increase the volatility of the Fund.
Securities
Markets. Securities
markets in emerging market countries are underdeveloped and are often considered
to be less correlated to global economic cycles than those markets located in
more developed countries. Securities markets in emerging market countries are
subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price
fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign
investment
and other factors, limit the supply of securities available for investment by
the Fund. This will affect the rate at which the Fund is able to invest in
emerging market countries, the purchase and sale prices for such securities and
the timing of purchases and sales. Emerging markets can experience high rates of
inflation, deflation and currency devaluation. The prices of certain securities
listed on securities markets in emerging market countries have been subject to
sharp fluctuations and sudden declines, and no assurance can be given as to the
future performance of listed securities in general. Volatility of prices may be
greater than in more developed securities markets. Moreover, securities markets
in emerging market countries may be closed for extended periods of time or
trading on securities markets may be suspended altogether due to political or
civil unrest. Market volatility may also be heightened by the actions of a small
number of investors. Brokerage firms in emerging market countries may be fewer
in number and less established than brokerage firms in more developed markets.
Since the Fund may need to effect securities transactions through these
brokerage firms, the Fund is subject to the risk that these brokerage firms will
not be able to fulfill their obligations to the Fund. This risk is magnified to
the extent the Fund effects securities transactions through a single brokerage
firm or a small number of brokerage firms. In addition, the infrastructure for
the safe custody of securities and for purchasing and selling securities,
settling trades, collecting dividends, initiating corporate actions, and
following corporate activity is not as well developed in emerging market
countries as is the case in certain more developed markets.
Political
and Economic Risk. Certain
emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities included in the Fund’s Index. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or
operating
in emerging market countries and may inhibit the Fund’s ability to track its
Index. In addition, the Fund may not be able to buy or sell securities or
receive full value for such securities. Moreover, certain emerging market
countries may require governmental approval or special licenses prior to
investments by foreign investors and may limit the amount of investments by
foreign investors in a particular industry and/or issuer; may limit such foreign
investment to a certain class of securities of an issuer that may have less
advantageous rights than the classes available for purchase by domiciliaries of
such emerging market countries; and/or may impose additional taxes on foreign
investors. A delay in obtaining a required government approval or a license
would delay investments in those emerging market countries, and, as a result,
the Fund may not be able to invest in certain securities while approval is
pending. The government of certain emerging market countries may also withdraw
or decline to renew a license that enables the Fund to invest in such country.
These factors make investing in issuers located or operating in emerging market
countries significantly riskier than investing in issuers located or operating
in more developed countries, and any one of them could cause a decline in the
value of the Fund’s Shares.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there
may
be legal restrictions or limitations on the ability of the Fund to recover
assets held in custody by a foreign sub-custodian in the event of the bankruptcy
of the sub-custodian. Because settlement systems in emerging market countries
may be less organized than in other developed markets, there may be a risk that
settlement may be delayed and that cash or securities of the Fund may be in
jeopardy because of failures of or defects in the systems. Under the laws in
many emerging market countries, the Fund may be required to release local shares
before receiving cash payment or may be required to make cash payment prior to
receiving local shares, creating a risk that the Fund may surrender cash or
securities without ever receiving securities or cash from the other party.
Settlement systems in emerging market countries also have a higher risk of
failed trades and back to back settlements may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event of a redemption request from
an Authorized Participant, the Fund will be required to deliver U.S. dollars to
the Authorized Participant on the settlement date. In the event that the Fund is
not able to convert the foreign currency to U.S. dollars in time for settlement,
which may occur as a result of the delays described above, the Fund may be
required to liquidate certain investments and/or borrow money in order to fund
such redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant Exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Economic events in any one Asian country can have a
significant effect on the entire Asian region as well as on major trading
partners outside Asia, and any adverse effect on some or all of the Asian
countries and regions in which the Fund invests. The securities markets in some
Asian economies are relatively underdeveloped and may subject the Fund to higher
action costs or greater uncertainty than investments in more developed
securities markets. Such risks may adversely affect the value of the Fund’s
investments.
Special
Risk Considerations of Investing in Chinese Issuers. Investments
in securities of Chinese issuers, including issuers outside of China, involve
certain risks and considerations not typically associated with investments in
U.S securities. These risks include among others (i) more frequent (and
potentially widespread) trading suspensions and government interventions with
respect to Chinese issuers resulting in a lack of liquidity and in price
volatility, (ii) currency revaluations and other currency exchange rate
fluctuations or blockage, (iii) the nature and extent of intervention by the
Chinese government in the Chinese securities markets, whether such intervention
will continue and the impact of such intervention or its discontinuation, (iv)
the risk of nationalization or expropriation of assets, (v) the risk that the
Chinese government may decide not to continue to support economic reform
programs, (vi) limitations on the use of brokers, (vii) higher rates of
inflation, (viii) greater political, economic and social uncertainty, (ix)
market volatility caused by any potential regional or territorial conflicts or
natural or other disasters, and (x) the risk of increased trade tariffs,
embargoes, sanctions investment restrictions and other trade limitations.
Certain securities are, or may in the future become restricted, and the Fund may
be forced to sell such securities and incur a loss as a result. In addition, the
economy of China differs, often unfavorably, from the U.S. economy in such
respects as structure, general development, government involvement, wealth
distribution, rate of inflation, growth rate, interest rates, allocation of
resources and capital reinvestment, among others. The Chinese central government
has historically exercised substantial control over virtually every sector of
the Chinese economy through administrative regulation and/or state ownership and
actions of the Chinese central and local government authorities continue to have
a substantial effect on economic conditions in China. In addition, the Chinese
government has from time to time taken actions that influence the prices at
which certain goods may be sold, encourage companies to invest or concentrate in
particular industries, induce mergers between companies in certain industries
and induce private companies to publicly offer their securities to increase or
continue the rate of economic growth, control the rate of inflation or otherwise
regulate economic expansion. The Chinese government may do so in the future as
well, potentially having a significant adverse effect on economic conditions in
China.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in an European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. In a referendum held on June 23,
2016, voters in the United Kingdom voted to leave the European Union, creating
economic and political uncertainty in its wake. On January 31, 2020, the United
Kingdom officially withdrew from the European Union and the United Kingdom
entered a transition period which ended on December 31, 2020. On December 30,
2020, the European Union and United Kingdom signed the EU-UK Trade and
Cooperation Agreement, an agreement on the terms governing certain aspects of
the European Union’s and the United Kingdom’s relationship following the end of
the transition period. Notwithstanding the EU-UK Trade and Cooperation
Agreement, following the transition period, there is likely to be considerable
uncertainty as to the United Kingdom’s post-transition framework.
Special
Risk Considerations of Investing in United Kingdom Issuers. Investments
in securities of United Kingdom issuers, including issuers located outside of
the United Kingdom that generate significant revenues from the United Kingdom,
involve risks and special considerations not typically associated with
investments in the U.S. securities markets. Investments in United Kingdom
issuers may subject the Fund to regulatory, political, currency, security and
economic risks specific to the United Kingdom. The British economy relies
heavily on the export of financials to the United States and other European
countries. The British economy, along with the United States and certain other
European Union economies, experienced a significant economic slowdown during the
recent financial crisis. In a referendum held on June 23, 2016, voters in the
United Kingdom voted to leave the European Union, creating economic and
political uncertainty in its wake. On January 31, 2020, the United Kingdom
officially withdrew from the European Union. On December 30, 2020, the European
Union and United Kingdom signed the EU-UK Trade and Cooperation Agreement, an
agreement on the terms governing certain aspects of the European Union’s and the
United Kingdom’s relationship following the end of the transition period.
Notwithstanding the EU-UK Trade and Cooperation Agreement, following the
transition period, there is likely to be considerable uncertainty as to the
United Kingdom’s post-transition framework.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited
securities.
Investments in depositary receipts may be less liquid than the underlying shares
in their primary trading market. The issuers of depositary receipts may
discontinue issuing new depositary receipts and withdraw existing depositary
receipts at any time, which may result in costs and delays in the distribution
of the underlying assets to the Fund and may negatively impact the Fund’s
performance.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for in-kind securities. Therefore,
it may be required to sell portfolio securities and subsequently incur brokerage
costs and/or recognize gains or losses on such sales that the Fund might not
have recognized if it were to distribute portfolio securities in kind. As such,
investments in Shares may be less tax-efficient than an investment in a
conventional ETF. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
High
Portfolio Turnover Risk.
The Fund may engage in active and frequent trading of its portfolio securities,
which will result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of the securities and on reinvestment in other securities. High portfolio
turnover may also result in higher taxes when Fund Shares are held in a taxable
account. The effects of high portfolio turnover may adversely affect Fund
performance.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (to the extent the Fund effects creations and redemptions in
cash) raising cash to meet redemptions or deploying cash in connection with
newly created Creation Units. Transaction costs, including brokerage costs, will
decrease the Fund’s net asset value to the extent not offset by the transaction
fee payable by an Authorized Participant.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards, a lack of liquidity in markets in which such securities
trade, potential adverse tax consequences or other regulatory reasons (such as
diversification requirements). To the extent the Fund utilizes depositary
receipts, the purchase of depositary receipts may negatively affect the Fund’s
ability to track the performance of the Index and increase tracking error, which
may be exacerbated if the issuer of the depositary receipt discontinues issuing
new depositary receipts or withdraws existing depositary receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may
be
adversely impacted and may result in additional trading costs and/or increase
the index tracking risk. The Fund may also need to rely on borrowings to meet
redemptions, which may lead to increased expenses. For tax efficiency purposes,
the Fund may sell certain securities, and such sale may cause the Fund to
realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversification
Risk.
The Fund may become classified as
“non-diversified” under the Investment Company Act of 1940 solely as a result of
a change in relative market capitalization or index weighting of one or more
constituents of the its Index. If the Fund becomes non-diversified, it may
invest a greater portion of its assets in securities of a smaller number of
individual issuers than a diversified fund. As a result, changes in the market
value of a single investment could cause greater fluctuations in share price
than would occur in a more diversified fund.
Index-Related
Concentration Risk. The
Fund’s assets may be concentrated in a particular sector or sectors or industry
or group of industries to reflect the Index’s allocation to those types of
securities. The securities of many or all of the companies in
the same sector or industry may decline in
value due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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Best
Quarter: |
18.64 |
% |
4Q 2022 |
Worst
Quarter: |
-23.87 |
% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past One
Year |
Past Five
Years |
Since
Inception (7/13/2015) |
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|
VanEck Morningstar International Moat
ETF (return before taxes) |
-7.42% |
0.14% |
2.83% |
|
|
VanEck Morningstar International Moat
ETF (return after taxes on distributions) |
-8.28% |
-0.72% |
1.87% |
|
|
VanEck Morningstar International Moat
ETF (return after taxes on distributions and sale of Fund
Shares) |
-4.06% |
0.06% |
2.04% |
|
|
Morningstar®
Global ex-US Moat Focus IndexSM
(reflects no deduction for fees, expenses or taxes, except withholding
taxes) |
-6.59% |
0.73% |
3.54% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
10.48% |
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See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
July
2015 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck Morningstar SMID Moat
ETF
(the
“Fund”) seeks to track as closely as possible, before fees and expenses, the
price and yield performance of the Morningstar®
US
Small-Mid Cap Moat Focus IndexSM
(the “US Small-Mid Cap Moat Focus Index” or the
“Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.45 |
% |
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|
Other
Expenses(a)
|
0.12 |
% |
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|
Total
Annual Fund Operating Expenses(a) |
0.57 |
% |
|
|
Fee
Waivers and Expense Reimbursement(b) |
-0.08 |
% |
|
|
Total
Annual Fund Operating Expenses after Fee Waiver and Expense Reimbursement
(b) |
0.49 |
% |
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(a) “Other Expenses” are based
on estimated amounts for the current fiscal
year.
(b) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.49% of the Fund’s average daily net
assets per year until at least February 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waiver arrangement for
only the first year). Although your actual costs may be higher or lower, based
on these assumptions, your costs would be:
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YEAR
|
EXPENSES |
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1 |
$50 |
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3 |
$175 |
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. The
Fund commenced operations on October 4, 2022, therefore no portfolio turnover
figures are available for the fiscal year ended September 30,
2022.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The US Small-Mid Cap Moat Focus Index is comprised of small- and
medium-capitalization companies as defined by Morningstar, Inc. (“Morningstar”
or the “Index provider”), that Morningstar determines have sustainable
competitive advantages based on a proprietary methodology that considers
quantitative and qualitative factors (“wide and narrow moat companies”). The
quantitative factors used by Morningstar to identify competitive advantages
currently include historical and projected returns on invested capital relative
to cost of capital. The qualitative factors used by Morningstar to identify
competitive advantages currently include
customer
switching cost (i.e.,
the costs of customers switching to competitors), internal cost advantages,
intangible assets (e.g.,
intellectual property and brands), network effects (i.e.,
whether products or services become more valuable as the number of customers
grows) and efficient scale (i.e.,
whether the company effectively serves a limited market that potential rivals
have little incentive to enter into). Wide moat companies are those that
Morningstar believes will maintain their competitive advantage(s) for at least
20 years. Narrow moat companies are those that Morningstar believes will
maintain their competitive advantage(s) for at least 10 years. Wide and narrow
moat companies are selected from the universe of companies represented in the
Morningstar®
US
Small-Mid Cap Moat Focus IndexSM
(the “Parent Index”), a broad market index representing small- and
medium-capitalization U.S. companies. For purposes of the Parent Index,
Morningstar considers those companies in the bottom 70% - 90% of total U.S.
market cap to be medium-capitalization companies and those companies in the
bottom 90% - 97% to be small-capitalization companies. The Index targets a
select group of equity securities of wide and narrow moat companies, which are
those companies that, according to Morningstar’s equity research team, are
attractively priced based on pre-defined factors as of each index review.
Morningstar utilizes a momentum screen, in which momentum represents a
security’s 12-month price change. A momentum signal is used to exclude 20% of
the wide and narrow moat stocks in the Parent Index with the worst 12-month
momentum based on a 12-month price change of each stock. Out of the companies in
the Parent Index that Morningstar determines are wide or narrow moat companies
and display 12-month momentum in the top 80%, Morningstar selects companies to
be included in the Index as determined by the ratio of the issuer’s common stock
price to Morningstar’s estimate of fair value. Morningstar’s fair value
estimates are calculated using standardized, proprietary valuation models. The
Fund’s 80% investment policy is non-fundamental and may be changed without
shareholder approval upon 60 days’ prior written notice to
shareholders.
As
of December 31, 2022, the US Small-Mid Cap Moat Focus Index included 95
securities of companies with a full market capitalization range of between
approximately $2.3 billion and $40 billion and a weighted average full market
capitalization of $15.1 billion. These amounts are subject to change. The Index
is divided into two equally-weighted sub-portfolios, and each is reconstituted
and rebalanced semi-annually on alternating quarters.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the US Small-Mid Cap Moat Focus Index by investing
in a portfolio of securities that generally replicates the US Small-Mid Cap Moat
Focus Index. Unlike many investment companies that try to “beat” the performance
of a benchmark index, the Fund does not try to “beat” the US Small-Mid Cap Moat
Focus Index and does not seek temporary defensive positions that are
inconsistent with its investment objective of seeking to track the US Small-Mid
Cap Moat Focus Index.
The Fund is classified as a non-diversified
fund under the Investment Company Act of 1940, as amended (the "Investment
Company Act of 1940") and, therefore, may invest a greater percentage of its
assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the US Small-Mid Cap Moat Focus Index concentrates in an industry or group of
industries. As of September 30, 2022, each of the industrials, information
technology, consumer discretionary, financials, and health care sectors
represented a significant portion of the US Small-Mid Cap Moat Focus
Index.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a deposit with a bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those
returns.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger
companies.
Consumer Discretionary Sector
Risk. The consumer discretionary sector comprises
companies whose businesses are sensitive to economic cycles, such as
manufacturers of high-end apparel and automobile and leisure companies.
Companies in the consumer discretionary sector are subject
to fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Health
Care Sector Risk.
Companies in the health care sector may be affected by extensive government
regulation, restrictions on government reimbursement for medical expenses,
rising costs of medical products and services, pricing pressure, an increased
emphasis on outpatient services, limited number of products, industry
innovation, changes in technologies and other market developments. Many health
care companies are heavily dependent on patent protection. The expiration of
patents may adversely affect the profitability of these companies. Many health
care companies are subject to extensive litigation based on product liability
and similar claims.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Market
Risk. The
prices of securities are subject to the risks associated with investing in the
securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
High
Portfolio Turnover Risk.
The Fund may engage in active and frequent trading of its portfolio securities,
which will result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of the securities and on reinvestment in other securities. High portfolio
turnover may also result in higher taxes when Fund Shares are held in a taxable
account. The effects of high portfolio turnover may adversely affect Fund
performance.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (to the extent the Fund effects creations and redemptions in
cash) raising cash to meet redemptions or deploying cash in connection with
newly created Creation Units. Transaction costs, including brokerage costs, will
decrease the Fund’s net asset value to the extent not offset by the transaction
fee payable by an Authorized Participant.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index
provider’s
or others’ errors will be borne by the Fund and its shareholders. Additionally,
when the Index is rebalanced and the Fund in turn rebalances its portfolio to
attempt to increase the correlation between the Fund’s portfolio and the Index,
any transaction costs and market exposure arising from such portfolio
rebalancing will be borne directly by the Fund and its shareholders. Apart from
scheduled rebalances, the Index provider or its agents may carry out additional
ad hoc rebalances to the Index. Therefore, errors and additional ad hoc
rebalances carried out by the Index provider or its agents to the Index may
increase the costs to and the tracking error risk of the Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards, a lack of liquidity in markets in which such securities
trade, potential adverse tax consequences or other regulatory reasons (such as
diversification requirements). To the extent the Fund utilizes depositary
receipts, the purchase of depositary receipts may negatively affect the Fund’s
ability to track the performance of the Index and increase tracking error, which
may be exacerbated if the issuer of the depositary receipt discontinues issuing
new depositary receipts or withdraws existing depositary receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
New
Fund Risk.
The Fund is a new fund, with a limited or no operating history and a small asset
base. There can be no assurance that the Fund will grow to or maintain a viable
size. Due to the Fund’s small asset base, certain of the Fund’s expenses and its
portfolio transaction costs may be higher than those of a fund with a larger
asset base. To the extent that the Fund does not grow to or maintain a viable
size, it may be liquidated, and the expenses, timing and tax consequences of
such liquidation may not be favorable to some shareholders.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate
or
a diversified mix of securities for any particular economic cycle. The timing of
changes in the securities of the Fund’s portfolio in seeking to replicate its
Index could have a negative effect on the Fund. Unlike with an actively managed
fund, the Adviser does not use techniques or defensive strategies designed to
lessen the effects of market volatility or to reduce the impact of periods of
market decline. Additionally, unusual market conditions may cause the Fund’s
Index provider to postpone a scheduled rebalance or reconstitution, which could
cause the Fund’s Index to vary from its normal or expected composition. This
means that, based on market and economic conditions, the Fund’s performance
could be lower than funds that may actively shift their portfolio assets to take
advantage of market opportunities or to lessen the impact of a market decline or
a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if its Index is
comprised of securities of a limited number of
companies.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The Fund commenced operations on October 4,
2022 and therefore does not have a performance history for the calendar year
ended December 31, 2022. Once available, the Fund’s performance
information will be accessible on the Fund’s website at www.vaneck.com.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van
Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
October
2022 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck Morningstar Wide Moat ETF
(the “Fund”) seeks to replicate as closely as possible, before fees and
expenses, the price and yield performance of the Morningstar®
Wide Moat Focus IndexSM
(the “Wide Moat Focus Index” or the “Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.45 |
% |
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Other
Expenses |
0.01 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.46 |
% |
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Fee
Waivers and Expense Reimbursement(a) |
0.00 |
% |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.46 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.49% of the Fund’s average daily net
assets per year until at least February 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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YEAR |
EXPENSES |
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1 |
$47 |
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3 |
$148 |
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5 |
$258 |
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10 |
$579 |
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
51% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The Wide Moat Focus Index is comprised of securities issued by companies
that Morningstar, Inc. (“Morningstar” or the “Index provider”) determines to
have sustainable competitive advantages based on a proprietary methodology that
considers quantitative and qualitative factors (“wide moat companies”). Wide
moat companies are selected from the universe of companies represented in
the
Morningstar®
US Market IndexSM,
a broad market index representing 97% of U.S. market capitalization. The Wide
Moat Focus Index targets a select group of wide moat companies: those that
according to Morningstar’s equity research team are attractively priced as of
each Wide Moat Focus Index review. Out of the companies in the Morningstar US
Market Index that Morningstar determines are wide moat companies, Morningstar
selects companies to be included in the Wide Moat Focus Index as determined by
the ratio of Morningstar’s estimate of fair value of the issuer’s common stock
to the price. Morningstar’s equity research fair value estimates are calculated
using a standardized, proprietary valuation model. Wide moat companies may
include medium-capitalization companies. The Fund’s 80% investment policy is
non-fundamental and may be changed without shareholder approval upon 60 days’
prior written notice to shareholders.
As
of December 31, 2022, the Wide Moat Focus Index included 49 securities of
companies with a full market capitalization range of between approximately $5.1
billion and $1,787.7 billion and a weighted average full market capitalization
of $142.5 billion. These amounts are subject to change.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Wide Moat Focus Index by investing in a
portfolio of securities that generally replicates the Wide Moat Focus Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Wide Moat Focus Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Wide Moat Focus
Index.
The
Fund may become "non-diversified" as defined under the Investment Company Act of
1940, as amended (the "Investment Company Act of 1940"), solely as a result of a
change in relative market capitalization or index weighting of one or more
constituents of the Wide Moat Focus Index. This means that the Fund may invest a
greater percentage of its assets in a limited number of issuers than would be
the case if the Fund were always managed as a diversified management investment
company. The Fund intends to be diversified in approximately the same proportion
as the Wide Moat Focus Index. Shareholder approval will not be sought when the
Fund crosses from diversified to non-diversified status due solely to a change
in the relative market capitalization or index weighting of one or more
constituents of the Wide Moat Focus Index.
The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Wide Moat Focus Index concentrates in an industry or group of industries. As
of September 30, 2022, each of the information technology, industrials, health
care, financials and consumer discretionary sectors represented a significant
portion of the Fund.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a deposit with a bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Consumer Discretionary Sector
Risk. The consumer discretionary sector comprises
companies whose businesses are sensitive to economic cycles, such as
manufacturers of high-end apparel and automobile and leisure companies.
Companies in the consumer discretionary sector are subject
to fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Health
Care Sector Risk.
Companies in the health care sector may be affected by extensive government
regulation, restrictions on government reimbursement for medical expenses,
rising costs of medical products and services, pricing pressure, an increased
emphasis on outpatient services, limited number of products, industry
innovation, changes in technologies and other market developments. Many health
care companies are heavily dependent on patent protection. The expiration of
patents may adversely affect the profitability of these companies. Many health
care companies are subject to extensive litigation based on product liability
and similar claims.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Medium-Capitalization
Companies Risk.
Medium-capitalization companies may be more volatile and more likely than
large-capitalization companies to have narrower product lines, fewer financial
resources, less management depth and experience and less competitive strength.
In addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. Returns on
investments in securities of medium-capitalization companies could trail the
returns on investments in securities of large-capitalization
companies.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
High
Portfolio Turnover Risk.
The Fund may engage in active and frequent trading of its portfolio securities,
which will result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of the securities and on reinvestment in other securities. High portfolio
turnover may also result in higher taxes when Fund Shares are held in a taxable
account. The effects of high portfolio turnover may adversely affect Fund
performance.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (to the extent the Fund effects creations and redemptions in
cash) raising cash to meet redemptions or deploying cash in connection with
newly created Creation Units. Transaction costs, including brokerage costs, will
decrease the Fund’s net asset value to the extent not offset by the transaction
fee payable by an Authorized Participant.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards, a lack of liquidity in markets in which such securities
trade, potential adverse tax consequences or other regulatory reasons (such as
diversification requirements). To the extent the Fund utilizes depositary
receipts, the purchase
of
depositary receipts may negatively affect the Fund’s ability to track the
performance of the Index and increase tracking error, which may be exacerbated
if the issuer of the depositary receipt discontinues issuing new depositary
receipts or withdraws existing depositary receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk. The
Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk.
There can be no assurance that an active trading market for the Shares will
develop or be maintained, as applicable. Further, secondary markets may be
subject to irregular trading activity, wide bid/ask spreads and extended trade
settlement periods in times of market stress because market makers and
Authorized Participants may step away from making a market in the Shares and in
executing creation and redemption orders, which could cause a material deviation
in the Fund’s market price from its net asset value.
Trading
Issues Risk. Trading
in shares on the exchange may be halted due to market conditions or for reasons
that, in the view of the exchange, make trading in shares inadvisable. In
addition, trading in shares on the exchange is subject to trading halts caused
by extraordinary market volatility pursuant to the relevant exchange’s “circuit
breaker” rules. If a trading halt or unanticipated early close of the exchange
occurs, a shareholder may be unable to purchase or sell Shares of the Fund.
There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares.
The market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times,
bid/ask
spreads on the exchange and the resulting premium or discount to the Shares’ net
asset value may widen. Additionally, in stressed market conditions, the market
for the Fund’s Shares may become less liquid in response to deteriorating
liquidity in the markets for the Fund’s underlying portfolio holdings and a
shareholder may be unable to sell his or her Shares.
Non-Diversification
Risk.
The Fund may become classified as
“non-diversified” under the Investment Company Act of 1940 solely as a result of
a change in relative market capitalization or index weighting of one or more
constituents of the its Index. If the Fund becomes non-diversified, it may
invest a greater portion of its assets in securities of a smaller number of
individual issuers than a diversified fund. As a result, changes in the market
value of a single investment could cause greater fluctuations in share price
than would occur in a more diversified
fund.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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Best
Quarter: |
19.24 |
% |
2Q 2020 |
Worst
Quarter: |
-20.01 |
% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past One
Year |
Past Five
Years |
Past Ten
Years |
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VanEck Morningstar Wide Moat ETF
(return before taxes) |
-13.54% |
10.40% |
12.83% |
|
|
VanEck Morningstar Wide Moat ETF
(return after taxes on distributions) |
-13.80% |
10.04% |
12.48% |
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VanEck Morningstar Wide Moat ETF
(return after taxes on distributions and sale of Fund
Shares) |
-7.84% |
8.23% |
10.68% |
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|
Morningstar®
Wide Moat Focus IndexSM
(reflects no deduction for
fees, expenses or taxes) |
-13.08% |
10.95% |
13.39% |
|
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
-18.11% |
9.42% |
12.56% |
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See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
April
2012 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck®
Social Sentiment ETF
(the
“Fund”) seeks to track as closely as possible, before fees and expenses, the
price and yield performance of the
BUZZ NextGen AI US Sentiment Leaders Index
(the
“Sentiment Leaders Index”
or the “Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.75 |
% |
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Other
Expenses(a)
|
0.41 |
% |
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|
Total
Annual Fund Operating Expenses(a) |
1.16 |
% |
|
|
Fee
Waivers and Expense Reimbursement(a) |
-0.41 |
% |
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|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.75 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
(i) pay the offering costs until at least February 1,
2024 and (ii) contractually agreed to waive or reduce its
management fees and/or pay Fund expenses in an amount equal to the Fund’s
extraordinary legal expenses up to $500,000 until at least February 1,
2024.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
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YEAR
|
EXPENSES |
|
|
1 |
$77 |
|
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|
3 |
$328 |
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|
5 |
$599 |
|
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|
10 |
$1,372 |
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
263% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its
total assets in securities that comprise the Fund’s benchmark index.
The
Sentiment Leaders Index is
comprised of common stocks of U.S. companies selected by a rules-based
quantitative methodology developed by BUZZ Holdings
ULC (the
“Index provider”), which is designed to identify the U.S. common stocks with the
most “positive insights” collected from online sources including social media,
news articles, blog posts and other alternative datasets. “Positive
insights”
are a measure of the degree of positive company sentiment as well as the breadth
of active discussion about each
company
by participants on online platforms.
The
75 companies with the highest positive insight scores
that
meet certain market capitalization and average daily trading volume requirements
will be selected for inclusion in the Sentiment
Leaders Index.
Such
companies may include medium-capitalization companies. As of December 31, 2022,
the Sentiment Leaders Index included 75 securities of companies with a market
capitalization range of between approximately $5.1 billion and $2,066.9 billion
and a weighted average market capitalization of $270.7 billion. These amounts
are subject to change. The Fund’s 80% investment policy is non-fundamental and
may be changed without shareholder approval upon 60 days’ prior written notice
to shareholders. The Sentiment Leaders Index is reconstituted and rebalanced
monthly.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Sentiment Leaders Index by investing in a
portfolio of securities that generally replicates the Sentiment Leaders Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Sentiment Leaders Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to track the Sentiment Leaders
Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the "Investment Company Act of 1940") and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the
Sentiment Leaders Index concentrates
in an industry or group of industries. As of September 30,
2022,
each of the information technology, consumer discretionary and communication
services sectors represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a deposit with a bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Social
Media Analytics Risk. The
Index provider relies heavily on social media analytics, which are relatively
new and untested. “Social media” is an umbrella term that encompasses various
activities that integrate technology, social interaction and content creation.
Investing in companies based on social media analytics involves the potential
risk of market manipulation because social media posts may be made with an
intent to inflate, or otherwise manipulate, the public perception of a company
stock or other investment. Although the Index provider attempts to mitigate the
potential risk of such manipulation by employing screens to identify posts which
may be computer generated or deceptive and by employing market capitalization
and trading volume criteria to remove companies which may be more likely targets
for such manipulation, there is no guarantee that the Index’s model will
successfully reduce such risk. Furthermore, text and sentiment analysis of
social media postings may prove inaccurate in predicting a company’s stock
performance; that is, high positive sentiment may not correlate with positive
change in the value of a company’s stock and low positive or negative sentiment
may not correlate with negative change in the value of a company’s stock.
Additionally, social media companies are susceptible to the following risks
which may disrupt the Index provider’s ability to receive meaningful data from
such sites: permanent cessation of operations, disruption in service caused by
hardware or software failure, interruptions or delays in service by third-party
data center hosting facilities and maintenance providers, security breaches
involving certain private, sensitive, proprietary and confidential information
managed and transmitted by social media companies, and privacy concerns and
laws, evolving internet regulation and other foreign or domestic regulations
that may limit or otherwise affect the operations of social media
companies.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those
returns.
Medium-Capitalization
Companies Risk.
Medium-capitalization companies may be more volatile and more likely than
large-capitalization companies to have narrower product lines, fewer financial
resources, less management depth and experience and less competitive strength.
In addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. Returns on
investments in securities of medium-capitalization companies could trail the
returns on investments in securities of large-capitalization
companies.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these
companies.
Communication Services Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the communication services sector.
Companies in the communication services sector may be
affected by industry competition, substantial capital requirements, government
regulations and obsolescence of communications products and services due to
technological advancement.
Consumer Discretionary Sector
Risk. The consumer discretionary sector comprises
companies whose businesses are sensitive to economic cycles, such as
manufacturers of high-end apparel and automobile and leisure companies.
Companies in the consumer discretionary sector are subject
to fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
High
Portfolio Turnover Risk. The
Fund may engage in active and frequent trading of its portfolio securities,
which will result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of the securities and on reinvestment in other securities. High portfolio
turnover may also result in higher taxes when Fund Shares are held in a taxable
account. The effects of high portfolio turnover may adversely affect Fund
performance.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (to the extent the Fund effects creations and redemptions in
cash) raising cash to meet redemptions or deploying cash in connection with
newly created Creation Units. Transaction costs, including brokerage costs, will
decrease the Fund’s net asset value to the extent not offset by the transaction
fee payable by an Authorized Participant.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards, a lack of liquidity in markets in which such securities
trade, potential adverse tax consequences or other regulatory reasons (such as
diversification requirements). To the extent the Fund utilizes depositary
receipts, the purchase of depositary receipts may negatively affect the Fund’s
ability to track the performance of the Index and increase tracking error, which
may be exacerbated if the issuer of the depositary receipt discontinues issuing
new depositary receipts or withdraws existing depositary receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may
be
adversely impacted and may result in additional trading costs and/or increase
the index tracking risk. The Fund may also need to rely on borrowings to meet
redemptions, which may lead to increased expenses. For tax efficiency purposes,
the Fund may sell certain securities, and such sale may cause the Fund to
realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk. The
Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk.
There can be no assurance that an active trading market for the Shares will
develop or be maintained, as applicable. Further, secondary markets may be
subject to irregular trading activity, wide bid/ask spreads and extended trade
settlement periods in times of market stress because market makers and
Authorized Participants may step away from making a market in the Shares and in
executing creation and redemption orders, which could cause a material deviation
in the Fund’s market price from its net asset value.
Trading
Issues Risk. Trading
in shares on the exchange may be halted due to market conditions or for reasons
that, in the view of the exchange, make trading in shares inadvisable. In
addition, trading in shares on the exchange is subject to trading halts caused
by extraordinary market volatility pursuant to the relevant exchange’s “circuit
breaker” rules. If a trading halt or unanticipated early close of the exchange
occurs, a shareholder may be unable to purchase or sell Shares of the Fund.
There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares.
The market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk. The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if its Index is
comprised of securities of a limited number of
companies.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar Year
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Best
Quarter: |
-1.36% |
3Q 2022 |
Worst
Quarter: |
-33.34% |
2Q
2022 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past One
Year |
Since
Inception (03/02/2021) |
|
|
VanEck Social Sentiment ETF (return
before taxes) |
-47.67% |
-32.38% |
|
|
VanEck Social Sentiment ETF (return
after taxes on distributions) |
-47.72% |
-32.42% |
|
|
VanEck Social Sentiment ETF (return
after taxes on distributions and sale of Fund
Shares) |
-28.18% |
-23.64% |
|
|
BUZZ
NextGen AI US Sentiment Leaders Index
(reflects no deduction for
fees, expenses or taxes) |
-47.54% |
-32.13% |
|
|
S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
-18.11% |
1.10% |
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See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
|
Peter
H. Liao |
Portfolio
Manager |
February
2021 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
PURCHASE
AND SALE OF FUND SHARES
Individual
Shares of a Fund may only be purchased and sold in secondary market transactions
through a broker or a dealer at a market price. Shares of the Funds are listed
on the Exchange, and because Shares trade at market prices rather than NAV,
Shares of the Funds may trade at a price greater than NAV (i.e.,
a “premium”) or less than NAV (i.e.,
a “discount”).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares of a Fund (bid) and the
lowest price a seller is willing to accept for Shares (ask) when buying or
selling Shares in the secondary market (the “bid/ask spread”).
Recent
information, including information about each Fund’s NAV, market price, premiums
and discounts, and bid/ask spreads, is included on the Fund’s website at
www.vaneck.com.
TAX
INFORMATION
Each
Fund’s distributions (other than return of capital distributions) are taxable
and will generally be taxed as ordinary income or capital gains.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of the Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer or other intermediary or its employees or associated persons to
recommend the Fund over another investment. Ask your financial adviser or visit
your financial intermediary’s website for more information.
PRINCIPAL
INVESTMENT STRATEGIES
The
Adviser anticipates that, generally, each Fund will hold or gain exposure to all
of the securities that comprise its Index in proportion to their weightings in
such Index. However, to the extent it is not possible or practicable to purchase
all of those securities in those weightings, the Fund may purchase a sample of
securities in its Index. The Adviser may also choose to underweight or
overweight a security in a Fund’s Index, purchase securities not in the Fund’s
Index that the Adviser believes are appropriate to substitute for certain
securities in such Index or utilize various combinations of other available
investment techniques in seeking to replicate/track (as applicable) as closely
as possible, before fees and expenses, the price and yield performance of the
Fund’s Index. Each Fund may sell securities that are represented in its Index in
anticipation of their removal from its Index or purchase securities not
represented in its Index in anticipation of their addition to such Index. Each
Fund may also, in order to comply with tax diversification requirements of the
Internal Revenue Code, temporarily invest in securities not included in its
Index that are expected to be highly correlated with the securities included in
the Index.
FUNDAMENTAL
AND NON-FUNDAMENTAL POLICIES
Each
Fund’s investment objective and each of its other investment policies are
non-fundamental policies that may be changed by the Board of Trustees (the
“Board of Trustees”) of VanEck ETF Trust (the “Trust”) without shareholder
approval, except as noted in this Prospectus or the Statement of Additional
Information (“SAI”) under the section entitled “Investment Policies and
Restrictions—Investment Restrictions.”
RISKS
OF INVESTING IN THE FUND
The
following section provides additional information regarding the principal risks
identified under “Principal Risks of Investing in the Fund” in the Fund’s
“Summary Information” section, and a number of additional (non-principal) risks.
The risks checked in the chart below apply to the Fund as indicated. For a
description of the risks listed in the chart, please see "Glossary – Investment
Risks" below the chart. See also the Fund’s Statement of Additional Information
for information on certain other investments in which the Fund may invest and
other investment techniques in which the Fund may engage from time to time and
related risks.
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk. An investment in the Fund is not
a deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Therefore, you should
consider carefully the following risks before investing in the Fund, each of
which could significantly and adversely affect the value of an investment in the
Fund.
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|
Risk |
Durable
High Dividend ETF (DURA) |
Long/Flat
Trend ETF (LFEQ) |
Morningstar
ESG Moat ETF (MOTE) |
Morningstar
Global Wide Moat ETF (MOTG) |
Morningstar
International Moat ETF (MOTI) |
Morningstar
SMID Moat ETF (SMOT) |
Morningstar
Wide Moat ETF (MOAT) |
Social
Sentiment ETF (BUZZ) |
√
Principal Risk | X Additional Non-Principal Risk |
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Authorized
Participant Concentration Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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Cash
Transactions Risk |
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√ |
√ |
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Communication
Services Sector Risk |
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√ |
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|
√ |
Competitive
Advantage Assessment Risk |
√ |
|
√ |
√ |
√ |
|
√ |
|
Consumer
Discretionary Sector Risk |
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√ |
|
√ |
√ |
√ |
√ |
Consumer
Staples Sector Risk |
√ |
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√ |
√ |
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Depositary
Receipts Risk |
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√ |
√ |
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Derivatives
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
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Dividend
Paying Securities Risk |
√ |
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Emerging
Market Issuers Risk |
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√ |
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Equity
Securities Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
ESG
Investing Strategy Risk |
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√ |
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Financials
Sector Risk |
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√ |
√ |
√ |
√ |
√ |
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Foreign
Currency Risk |
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√ |
√ |
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Foreign
Securities Risk |
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√ |
√ |
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Risk |
Durable
High Dividend ETF (DURA) |
Long/Flat
Trend ETF (LFEQ) |
Morningstar
ESG Moat ETF (MOTE) |
Morningstar
Global Wide Moat ETF (MOTG) |
Morningstar
International Moat ETF (MOTI) |
Morningstar
SMID Moat ETF (SMOT) |
Morningstar
Wide Moat ETF (MOAT) |
Social
Sentiment ETF (BUZZ) |
√
Principal Risk | X Additional Non-Principal Risk |
Fund
Shares Trading, Premium/Discount Risk and Liquidity of Fund
Shares |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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Health
Care Sector Risk |
√ |
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|
√ |
√ |
√ |
√ |
|
High
Portfolio Turnover Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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Index-Related
Concentration Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
Index
Tracking Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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Industrials
Sector Risk |
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√ |
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√ |
√ |
|
Industry
Concentration Risk |
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Information
Technology Sector Risk |
√ |
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√ |
√ |
√ |
√ |
√ |
√ |
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Investment
Restrictions Risk |
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X |
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Leverage
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
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Market
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
Medium-Capitalization
Companies Risk |
√ |
|
√ |
√ |
√ |
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√ |
√ |
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No
Guarantee of Active Trading Market Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
Non-Diversified
Risk |
|
|
√ |
|
|
√ |
|
√ |
Non-Diversification
Risk |
√ |
√ |
|
√ |
√ |
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√ |
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Operational
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
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Passive
Management Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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Risk
of Investing in Other Funds |
|
√ |
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Shareholder
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
Small-
and Medium-Capitalization Companies Risk |
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√ |
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Social
Media Analytics Risk |
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√ |
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Special
Risk Considerations of Investing in Asian Issuers |
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√ |
√ |
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Special
Risk Considerations of Investing in Chinese Issuers |
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√ |
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Special
Risk Considerations of Investing in European Issuers |
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√ |
√ |
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Special
Risk Considerations of Investing in United Kingdom Issuers |
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Trading
Issues Risk |
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U.S.
Treasury Bills Risk |
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GLOSSARY
– INVESTMENT RISKS
Authorized
Participant Concentration Risk. The
Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
Cash
Transactions Risk.
Unlike other ETFs, the Fund effects its creations and redemptions at least
partially for cash, rather than wholly for in-kind securities. Because the Fund
currently intends to effect all or a portion of redemptions for cash, rather
than in-kind distributions, it may be required to sell portfolio securities in
order to obtain the cash needed to distribute redemption proceeds, which
involves transaction costs that the Fund may not have incurred had it effected
redemptions entirely in-kind. These costs may include brokerage costs and/or
taxable gains or losses, which may be imposed on the Fund and decrease the
Fund’s net asset value to the extent such costs are not offset by a transaction
fee payable by an Authorized Participant. If the Fund recognizes a gain on these
sales, this generally will cause the Fund to recognize a gain its might not
otherwise have recognized if it were to distribute portfolio securities in-kind,
or to recognize such gain sooner than would otherwise be required. As a result,
an investment in the Fund may be less tax-efficient than an investment in a more
conventional ETF. Other ETFs generally are able to make in-kind redemptions and
avoid realizing gains in connection with transactions designed to raise cash to
meet redemption requests. The Fund generally intends to distribute these gains
to shareholders to avoid being taxed on this gain at the Fund level and
otherwise comply with the special tax rules that apply to it. This strategy may
cause shareholders to be subject to tax on gains they would not otherwise be
subject to, or at an earlier date than, if they had made an investment in a
different ETF. Additionally, transactions may have to be carried out over
several days if the securities market is relatively illiquid and may involve
considerable transaction fees and taxes.
Communication Services Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the communication services sector.
Companies in the communication services sector may be
affected by industry competition, substantial capital requirements, government
regulations and obsolescence of communications products and services due to
technological advancement.
Competitive
Advantage Assessment Risk. Morningstar
may be incorrect in its assessment of the competitive advantages of the
companies selected for inclusion in the Fund’s index, and the securities issued
by such companies may underperform Morningstar’s expectations and have an
adverse effect on the Fund’s overall performance. There can also be no assurance
that wide or narrow moat companies will have sustainable competitive advantages
for any period of time. Competitive advantages for wide and narrow moat
companies may erode in a relatively short period of time due to, among other
reasons, changes in laws and regulations, intellectual property rights, economic
and political conditions and technological developments.
Consumer Discretionary Sector
Risk. The consumer discretionary sector comprises
companies whose businesses are sensitive to economic cycles, such as
manufacturers of high-end apparel and automobile and leisure companies.
Companies in the consumer discretionary sector are subject
to fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Consumer Staples Sector
Risk.
The consumer staples sector comprises companies whose
businesses are less sensitive to economic cycles, such as manufacturers and
distributors of food and beverages and producers of non-durable household goods
and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide economy, consumer spending, competition, demographics
and consumer preferences, exploration and production spending. Companies in this
sector are also affected by changes in government regulation, world events and
economic conditions.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Derivatives
Risk. Derivatives
and other similar instruments (referred to collectively as “derivatives”) are
financial instruments whose values are based on the value of one or more
reference assets or indicators, such as a security, currency, interest rate, or
index. The Fund’s use of derivatives involves risks different from, and possibly
greater than, the risks associated with investing
directly
in securities and other more traditional investments. Moreover, although the
value of a derivative is based on an underlying asset or indicator, a derivative
typically does not carry the same rights as would be the case if the Fund
invested directly in the underlying securities, currencies or other
assets.
Derivatives
are subject to a number of risks, such as potential changes in value in response
to market developments or, in the case of “over-the-counter” derivatives, as a
result of a counterparty’s credit quality and the risk that a derivative
transaction may not have the effect the Adviser anticipated. Derivatives also
involve the risk of mispricing or improper valuation and the risk that changes
in the value of a derivative may not achieve the desired correlation with the
underlying asset or indicator. Derivative transactions can create investment
leverage and may be highly volatile, and the Fund could lose more than the
amount it invests. The use of derivatives may increase the amount and affect the
timing and character of taxes payable by shareholders of the Fund.
Many
derivative transactions are entered into “over-the-counter” without a central
clearinghouse; as a result, the value of such a derivative transaction will
depend on, among other factors, the ability and the willingness of the Fund’s
counterparty to perform its obligations under the transaction. If a counterparty
were to default on its obligations, the Fund’s contractual remedies against such
counterparty may be subject to bankruptcy and insolvency laws, which could
affect the Fund’s rights as a creditor (e.g.,
the Fund may not receive the net amount of payments that it is contractually
entitled to receive). Counterparty risk also refers to the related risks of
having concentrated exposure to such a counterparty. A liquid secondary market
may not always exist for the Fund’s derivative positions at any time, and the
Fund may not be able to initiate or liquidate a swap position at an advantageous
time or price, which may result in significant losses. The Fund may also face
the risk that it may not be able to meet margin and payment requirements and
maintain a derivatives position.
Derivatives
are also subject to operational and legal risks. Operational risk generally
refers to risk related to potential operational issues, including documentation
issues, settlement issues, system failures, inadequate controls, and human
errors. Legal risk generally refers to insufficient documentation, insufficient
capacity or authority of counterparty, or legality or enforceability of a
contract.
Under
Rule 18f-4 (the “derivatives rule”), funds need to trade derivatives and other
transactions that create future fund payment or delivery obligations subject to
a value-at-risk (“VaR”) leverage limit, and certain derivatives risk management
program and reporting requirements. Generally, these requirements apply unless a
fund qualifies as a “limited derivatives user,” as defined in the derivatives
rule. Under the derivatives rule, when a fund trades reverse repurchase
agreements or similar financing transactions, including certain tender option
bonds, it needs to aggregate the amount of indebtedness associated with the
reverse repurchase agreements or similar financing transactions with the
aggregate amount of any other senior securities representing indebtedness when
calculating the fund’s asset coverage ratio or treat all such transactions as
derivatives transactions. Reverse repurchase agreements or similar financing
transactions aggregated with other indebtedness do not need to be included in
the calculation of whether a fund is a limited derivatives user, but for funds
subject to the VaR testing, reverse repurchase agreements and similar financing
transactions must be included for purposes of such testing whether treated as
derivatives transactions or not. The Securities and Exchange Commission also
provided guidance in connection with the derivatives rule regarding use of
securities lending collateral that may limit a fund's securities lending
activities. In addition, under the derivatives rule, the Fund is permitted to
invest in a security on a when-issued or forward-settling basis, or with a
non-standard settlement cycle, and the transaction will be deemed not to involve
a senior security under the Investment Company Act of 1940, provided that (i)
the Fund intends to physically settle the transaction and (ii) the transaction
will settle within 35 days of its trade date (the “Delayed-Settlement Securities
Provision”). The Fund may otherwise engage in such transactions that do not meet
the conditions of the Delayed-Settlement Securities Provision so long as the
Fund treats any such transaction as a “derivatives transaction” for purposes of
compliance with the derivatives rule. Furthermore, under the derivatives rule,
the Fund will be permitted to enter into an unfunded commitment agreement, and
such unfunded commitment agreement will not be subject to the asset coverage
requirements under the Investment Company Act of 1940, if the Fund reasonably
believes, at the time it enters into such agreement, that it will have
sufficient cash and cash equivalents to meet its obligations with respect to all
such agreements as they come due.
Dividend Paying Securities Risk.
There can be no assurance that securities that pay dividends will continue to
have a high dividend yield, strong financial health or attractive valuation for
any period of time. Securities that pay dividends, as a group, may be out of
favor with the market and may underperform the overall equity market or stocks
of companies that do not pay dividends. In addition, changes in the dividend
policies of the companies held by the Fund or the capital resources available
for such company’s dividend payments may adversely affect the Fund.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of
securities
by local banks, agents and depositories. Low trading volumes and volatile prices
in less developed markets may make trades harder to complete and settle, and
governments or trade groups may compel local agents to hold securities in
designated depositories that may not be subject to independent evaluation. Local
agents are held only to the standards of care of their local markets. In
general, the less developed a country’s securities markets are, the greater the
likelihood of custody problems. The Adviser may be limited in its ability to
assess the Index provider’s due diligence process over Index data prior to its
use in Index computation, construction and/or rebalancing. Additionally, each of
the factors described below could have a negative impact on the Fund’s
performance and increase the volatility of the Fund.
Securities
Markets. Securities
markets in emerging market countries are underdeveloped and are often considered
to be less correlated to global economic cycles than those markets located in
more developed countries. Securities markets in emerging market countries are
subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price
fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation.
Political
changes, social instability and adverse diplomatic developments in these
countries could result in the imposition of additional government restrictions,
including expropriation of assets, confiscatory taxes or nationalization of some
or all of the property held by the underlying issuers of securities included in
the Fund’s Index. There is no guarantee that the governments of these countries
will not revert back to some form of planned or non-market oriented economy, and
such governments continue to be active participants in many economic sectors
through ownership positions and regulation. The allocation of resources in such
countries is subject to a high level of government control. Such countries’
governments may strictly regulate the payment of foreign currency denominated
obligations and set monetary policy. Through their policies, these governments
may provide preferential treatment to particular industries or companies. The
policies set by the government of one of these countries could have a
substantial effect on that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to track its Index. In addition, the Fund may not be able to buy
or sell securities or receive full value for such securities. Moreover, certain
emerging market countries may require governmental approval or special licenses
prior to investments by foreign investors and may limit the amount of
investments by foreign investors in a particular industry and/or issuer; may
limit such foreign investment to a certain class of securities of an issuer that
may have less advantageous rights than the classes available for purchase by
domiciliaries of such emerging market countries; and/or may impose additional
taxes on foreign investors. A delay in obtaining a required government approval
or a license would delay investments in those emerging market countries, and, as
a result, the Fund may not be able to invest in certain securities while
approval is pending. The government of certain emerging market countries may
also withdraw or decline to renew a license that enables the Fund to invest in
such country. These factors make investing in issuers located or operating in
emerging market countries significantly riskier than investing in issuers
located or operating in more developed countries, and any one of them could
cause a decline in the value of the Fund’s Shares.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities
denominated
in such currencies. Furthermore, if permitted, the Fund may incur costs in
connection with conversions between U.S. dollars and an emerging market
country’s currency. Foreign exchange dealers realize a profit based on the
difference between the prices at which they are buying and selling various
currencies. Thus, a dealer normally will offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire immediately to resell that currency to the dealer. The Fund will conduct
its foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event of a redemption request from
an Authorized Participant, the Fund will be required to deliver U.S. dollars to
the Authorized Participant on the settlement date. In the event that the Fund is
not able to convert the foreign currency to U.S. dollars in time for settlement,
which may occur as a result of the delays described above, the Fund may be
required to liquidate certain investments and/or borrow money in order to fund
such redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant Exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders
rights
exist, it may not be possible to obtain swift and equitable enforcement of the
law. In addition, the enforcement of systems of taxation at federal, regional
and local levels in emerging market countries may be inconsistent and subject to
sudden change. The Fund has limited rights and few practical remedies in
emerging markets and the ability of U.S. authorities to bring enforcement
actions in emerging markets may be limited.
Equity Securities Risk.
The value of the equity securities held by the Fund may fall due to general
market and economic conditions, perceptions regarding the markets in which the
issuers of securities held by the Fund participate, or factors relating to
specific issuers in which the Fund invests. For example, an adverse event, such
as an unfavorable earnings report, may result in a decline in the value of
equity securities of an issuer held by the Fund; the price of the equity
securities of an issuer may be particularly sensitive to general movements in
the securities markets; or a drop in the securities markets may depress the
price of most or all of the equities securities held by the Fund. In addition,
the equity securities of an issuer in the Fund’s portfolio may decline in price
if the issuer fails to make anticipated dividend payments. Equity securities are
subordinated to preferred securities and debt in a company’s capital structure
with respect to priority to a share of corporate income, and therefore will be
subject to greater dividend risk than preferred securities or debt instruments.
In addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
ESG
Investing Strategy Risk. The
Fund’s ESG strategy could cause it to perform differently compared to funds that
do not have an ESG focus. The Fund’s ESG strategy may result in the Fund
investing in securities or industry sectors that underperform other securities
or underperform the market as a whole. The companies included in the US
Sustainability Moat Focus Index may differ from companies included in other
indices that use similar ESG screens. The Fund is also subject to the risk that
the companies identified by the Index provider do not operate as expected when
addressing ESG issues. Additionally, the Index provider’s proprietary valuation
model may not perform as intended, which may adversely affect an investment in
the Fund. Regulatory changes or interpretations regarding the definitions and/or
use of ESG criteria could have a material adverse effect on the Fund’s ability
to implement its ESG strategy.
Financials
Sector Risk. Companies
in the financials sector may be subject to extensive government regulation that
affects the scope of their activities, the prices they can charge and the amount
of capital they must maintain. The profitability of companies in the financials
sector may be adversely affected by increases in interest rates, by loan losses,
which usually increase in economic downturns, and by credit rating downgrades.
In addition, the financials sector is undergoing numerous changes, including
continuing consolidations, development of new products and structures and
changes to its regulatory framework. Furthermore, some companies in the
financials sector perceived as benefiting from government intervention in the
past may be subject to future government-imposed restrictions on their
businesses or face increased government involvement in their operations.
Increased government involvement in the financials sector, including measures
such as taking ownership positions in financial institutions, could result in a
dilution of the Fund’s investments in financial institutions.
Foreign Currency Risk. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Several
factors may affect the price of euros and the British pound sterling, including
the debt level and trade deficit of the Economic and Monetary Union and the
United Kingdom, inflation and interest rates of the Economic and Monetary Union
and the United Kingdom and investors’ expectations concerning inflation and
interest rates and global or regional political, economic or financial events
and situations. The European financial markets have experienced, and may
continue to experience, volatility and have been adversely affected by concerns
about economic downturns, credit rating downgrades, rising government debt
levels and possible default on or restructuring of government debt in several
European countries. These events have adversely affected, and may in the future
affect, the value and exchange rate of the euro and may continue to
significantly affect the economies of every country in Europe, including
European Union member countries that do not use the euro and non-European Union
member countries. In a referendum held on June 23, 2016, voters in the United
Kingdom voted to leave the European Union, creating economic and political
uncertainty in its wake. On January 31, 2020, the United Kingdom officially
withdrew from the European Union and the United Kingdom entered a transition
period which ended on December 31, 2020. On December 30, 2020, the European
Union and United Kingdom signed the EU-UK Trade and Cooperation Agreement, an
agreement on the terms governing certain aspects of the European Union’s and the
United Kingdom’s relationship following the end of the transition period.
Notwithstanding the EU-UK Trade and Cooperation Agreement, following the
transition period, there is likely to be considerable uncertainty as to the
United Kingdom’s post-transition framework. Significant uncertainty exists
regarding the effects such withdrawal will have on the euro, European economies
and the global markets. In addition, one or more countries may abandon the euro
and the impact of these actions, especially if conducted in a disorderly manner,
may have significant and far-reaching consequences on the euro.
The
value of certain emerging market countries’ currencies may be subject to a high
degree of fluctuation. This fluctuation may be due to changes in interest rates,
investors’ expectations concerning inflation and interest rates, the emerging
market country’s debt levels and trade deficit, the effects of monetary policies
issued by the United States, foreign governments, central banks or supranational
entities, the imposition of currency controls or other national or global
political or economic developments. For
example,
certain emerging market countries have experienced economic challenges and
liquidity issues with respect to their currency. The economies of certain
emerging market countries can be significantly affected by currency
devaluations. Certain emerging market countries may also have managed currencies
which are maintained at artificial levels relative to the U.S. dollar rather
than at levels determined by the market. This type of system could lead to
sudden and large adjustments in the currency, which in turn, may have a negative
effect on the Fund and its investments.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s
investments.
Certain
foreign markets that have historically been considered relatively stable may
become volatile in response to changed conditions or new developments. Increased
interconnectivity of world economies and financial markets increases the
possibility that adverse developments and conditions in one country or region
will affect the stability of economies and financial markets in other countries
or regions. Because the Fund may invest in securities denominated in foreign
currencies and some of the income received by the Fund may be in foreign
currencies, changes in currency exchange rates may negatively impact the Fund’s
return.
Foreign
issuers are often subject to less stringent requirements regarding accounting,
auditing, financial reporting and record keeping than are U.S. issuers, and
therefore, not all material information may be available or reliable. Securities
exchanges or foreign governments may adopt rules or regulations that may
negatively impact the Fund’s ability to invest in foreign securities or may
prevent the Fund from repatriating its investments. The Fund may also invest in
depositary receipts which involve similar risks to those associated with
investments in foreign securities. In addition, the Fund may not receive
shareholder communications or be permitted to vote the securities that it holds,
as the issuers may be under no legal obligation to distribute shareholder
communications.
Certain
foreign markets may rely heavily on particular industries or foreign capital and
are more vulnerable to diplomatic developments, the imposition of economic
sanctions against a particular country or countries, organizations, entities
and/or individuals, changes in international trade patterns, trade barriers, and
other protectionist or retaliatory measures. The United States and other nations
or international organizations may impose economic sanctions or take other
actions that may adversely affect issuers of specific countries. Economic
sanctions could, among other things, effectively restrict or eliminate the
Fund’s ability to purchase or sell securities or groups of securities for a
substantial period of time, and may make the Fund’s investments in such
securities harder to value. These sanctions, any future sanctions or other
actions, or even the threat of further sanctions or other actions, may
negatively affect the value and liquidity of the Fund.
Also,
certain issuers located in foreign countries in which the Fund invests may
operate in, or have dealings with, countries subject to sanctions and/or
embargoes imposed by the U.S. Government and the United Nations and/or countries
identified by the U.S. Government as state sponsors of terrorism. As a result,
an issuer may sustain damage to its reputation if it is identified as an issuer
which operates in, or has dealings with, such countries. The Fund, as an
investor in such issuers, will be indirectly subject to those
risks.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. Disruptions
to creations and redemptions, the existence of market volatility or potential
lack of an active trading market for Shares (including through a trading halt),
as well as other factors, may result in Shares trading at a significant premium
or discount to net asset value or to the intraday value of the Fund’s holdings.
The net asset value of the Shares will fluctuate with changes in the market
value of the Fund’s securities holdings. The market price of Shares may
fluctuate, in some cases materially, in accordance with changes in net asset
value and the intraday value of the Fund’s holdings, as well as supply and
demand on the Exchange. Shares may trade below, at or above their net asset
value. While the creation/redemption feature is designed to make it likely that
Shares normally will trade close to the value of the Fund’s holdings, market
prices are not expected to correlate exactly to the Fund’s net asset value due
to timing reasons, supply and demand imbalances and other factors. The price
differences may be due, in large part, to the fact that supply and demand forces
at work in the secondary trading market for Shares may be closely related to,
but not necessarily identical to, the same forces influencing the prices of the
securities of the Fund’s portfolio of investments trading individually or in the
aggregate at any point in time. If a shareholder purchases Shares at a time when
the market price is at a premium to the net asset value or sells Shares at a
time when the market price is at a discount to the net asset value, the
shareholder may pay significantly more or receive significantly less than the
underlying value of the Shares that were bought or sold or the shareholder may
be unable to sell his or her Shares. Any of these factors, discussed above and
further below, may lead to the Shares trading at a premium or discount to the
Fund’s net asset value. In addition, because certain of the Fund’s underlying
securities trade on exchanges that are closed when the exchange that Shares of
the Fund trade on is open, there are likely to be deviations between the
expected value of an underlying security and the closing security’s price
(i.e.,
the last quote from its closed foreign market) resulting in premiums or
discounts to net asset value that may be greater than those experienced by other
ETFs. In addition, the securities held by the Fund may be traded in markets that
close at a different time than the Exchange. Liquidity in those securities may
be reduced after the applicable closing times. Accordingly, during the time when
the Exchange is open but after the applicable
market
closing, fixing or settlement times, bid/ask spreads and the resulting premium
or discount to the Shares’ net asset value may widen. Additionally, in stressed
market conditions, the market for the Fund’s Shares may become less liquid in
response to deteriorating liquidity in the markets for the Fund’s underlying
portfolio holdings.
When
you buy or sell Shares of the Fund through a broker, you will likely incur a
brokerage commission or other charges imposed by brokers. In addition, the
market price of Shares, like the price of any exchange-traded security, includes
a bid/ask spread charged by the market makers or other participants that trade
the particular security. The spread of the Fund’s Shares varies over time based
on the Fund’s trading volume and market liquidity and may increase if the Fund’s
trading volume, the spread of the Fund’s underlying securities, or market
liquidity decrease. In times of severe market disruption, including when trading
of the Fund’s holdings may be halted, the bid/ask spread may increase
significantly. This means that Shares may trade at a discount to the Fund’s net
asset value, and the discount is likely to be greatest during significant market
volatility.
Health
Care Sector Risk.
Companies in the health care sector may be affected by extensive government
regulation, restrictions on government reimbursement for medical expenses,
rising costs of medical products and services, pricing pressure, an increased
emphasis on outpatient services, limited number of products, industry
innovation, changes in technologies and other market developments. Many health
care companies are heavily dependent on patent protection. The expiration of
patents may adversely affect the profitability of these companies. Many health
care companies are subject to extensive litigation based on product liability
and similar claims.
Health
care companies are subject to competitive forces that may make it difficult to
raise prices and, in fact, may result in price discounting. Many new products in
the health care sector may be subject to regulatory approvals. The process of
obtaining such approvals may be long and costly. Companies in the health care
sector may be thinly capitalized and may be susceptible to product
obsolescence.
High
Portfolio Turnover Risk. The
Fund may engage in active and frequent trading of its portfolio securities,
which will result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of the securities and on reinvestment in other securities. High portfolio
turnover may also result in higher taxes when Fund Shares are held in a taxable
account. The effects of high portfolio turnover may adversely affect Fund
performance.
Index-Related
Concentration Risk. The
Fund’s assets may be concentrated in a particular sector or sectors or industry
or group of industries to reflect the Index’s allocation to those types of
securities. The securities of many or all of the companies in the same sector or
industry may decline in value due to developments adversely affecting such
sector or industry. By concentrating its assets in a particular sector or
sectors or industry or group of industries, the Fund is subject to the risk that
economic, political or other conditions that have a negative effect on those
sectors and/or industries may negatively impact the Fund to a greater extent
than if the Fund’s assets were invested in a wider variety of
securities.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index, or (to the extent the Fund effects creations and redemptions in
cash) raising cash to meet redemptions or deploying cash in connection with
newly created Creation Units. Transaction costs, including brokerage costs, will
decrease the Fund’s net asset value to the extent not offset by the transaction
fee payable by an Authorized Participant.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Unusual market conditions may cause the Index provider to postpone a
scheduled rebalance, which could cause the Index to vary from its normal or
expected composition. There is no assurance that the Index provider or any
agents that may act on its behalf will compile the Index accurately, or that the
Index will be determined, composed or calculated accurately. Errors in respect
of the quality, accuracy and completeness of the data used to compile the Index
may occur from time to time and may not be identified and corrected by the Index
provider, particularly where the indices are less commonly used as benchmarks by
funds or managers. Therefore, gains, losses or costs associated with errors of
the Index provider or its agents will generally be borne by the Fund and its
shareholders. For example, during a period where the Index contains incorrect
constituents, the Fund would have market exposure to such constituents and would
be underexposed to the Index’s other constituents. Such errors may negatively or
positively impact the Fund and its shareholders.
When
the Index is rebalanced and the Fund in turn rebalances its portfolio to attempt
to increase the correlation between the Fund’s portfolio and the Index, any
transaction costs and market exposure arising from such portfolio rebalancing
will be borne directly by the Fund and its shareholders. The Fund may not be
fully invested at times either as a result of cash flows into the Fund or
reserves of cash held by the Fund to pay expenses or to meet redemptions. The
Fund may accept cash in connection with a purchase of Creation Units or effect
its redemptions in cash rather than in-kind and, as a result, the Fund’s ability
to match the return of the Index will be affected. In addition, the Fund may not
invest in certain securities and/or other assets included in the Index, or
invest in them in the exact proportions in which they are represented in the
Index. The Fund’s performance may also deviate from the return of the Index for
a variety of reasons, including legal restrictions or limitations imposed by the
governments of certain countries, certain exchange listing standards, a lack of
liquidity in markets in which such securities trade, potential adverse tax
consequences or other regulatory reasons (such as diversification requirements).
A lack of liquidity may be due to
various
events, including market events, economic conditions or investor perceptions.
Illiquid securities may be difficult to value and their value may be lower than
the market price of comparable liquid securities, which would negatively affect
the Fund’s performance. Moreover, the Fund may be delayed in purchasing or
selling securities included in the Index. When markets are volatile, the ability
to sell securities at fair value prices may be adversely impacted and may result
in additional trading costs and/or increase the index tracking risk. To the
extent the Fund encounters any issues with regard to currency convertibility
(including the cost of borrowing funds, if any), repatriation or economic
sanctions, such issues may also increase index tracking risk. The Fund may also
need to rely on borrowings to meet redemptions, which may lead to increased
expenses. For tax efficiency purposes, the Fund may sell certain securities, and
such sale may cause the Fund to realize a loss and deviate from the performance
of the Index. The Fund’s performance may also deviate from the performance of
the Index due to the impact of withholding taxes, late announcements relating to
changes to the Index and high turnover of the Index.
The
Fund may fair value certain of its investments, underlying currencies and/or
other assets. To the extent the Fund calculates its net asset value based on
fair value prices and the value of the Index is based on securities’ closing
prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices) or if the Fund
otherwise calculates its net asset value based on prices that differ from those
used in calculating the Index, the Fund’s ability to track the Index may be
adversely affected. The need to comply with the tax diversification and other
requirements of the Internal Revenue Code may also impact the Fund’s ability to
track the performance of the Index. In addition, if the Fund utilizes depositary
receipts or other derivative instruments, its return may not correlate as well
with the return of the Index as would be the case if the Fund purchased all the
securities in the Index directly. To the extent the Fund utilizes depositary
receipts, the purchase of depositary receipts may negatively affect the Fund’s
ability to track the performance of the Index and increase tracking error, which
may be exacerbated if the issuer of the depositary receipt discontinues issuing
new depositary receipts or withdraws existing depositary receipts. Actions taken
in response to proposed corporate actions could also result in increased
tracking error. In light of the factors discussed above, the Fund’s return may
deviate significantly from the return of the Index.
Apart
from scheduled rebalances, the Index provider or its agents may carry out
additional ad hoc rebalances to the Index in order, for example, to correct an
error in the selection of index constituents. When the Index is rebalanced and
the Fund in turn rebalances its portfolio to attempt to increase the correlation
between the Fund’s portfolio and the Index, any transaction costs and market
exposure arising from such portfolio rebalancing will be borne directly by the
Fund and its shareholders. Therefore, errors and additional ad hoc rebalances
carried out by the Index provider to the Index may increase the costs to and the
tracking error risk of the Fund.
Index
tracking risk may be heightened during times of increased market volatility or
other unusual market conditions. Changes to the composition of the Index in
connection with a rebalancing or reconstitution of the Index may cause the Fund
to experience increased volatility, during which time the Fund’s index tracking
risk may be heightened.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
The
stock prices of companies in the industrials sector are affected by supply and
demand both for their specific product or service and for industrial sector
products in general. The products of information manufacturing companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction. In addition, the industrials sector may also be
adversely affected by changes or trends in commodity prices, which may be
influenced or characterized by unpredictable factors.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Investment
Restrictions Risk. The
Fund is subject to the conditions set forth in certain provisions of the
Investment Company Act of 1940 and Securities and Exchange Commission
regulations thereunder that limit the amount that the Fund and its affiliates,
in the aggregate, can invest in the outstanding voting securities of an
unaffiliated investment company or business development company. The Fund and
its affiliates may not actively acquire “control” of an investment company or
business development company, which is presumed once ownership of an investment
company’s outstanding voting securities exceeds 25%. Also, to comply with
provisions of the Investment Company Act of 1940 and regulations thereunder, the
Adviser may be required to vote shares of an investment company or business
development company in the same general proportion as shares held by other
shareholders of the investment company or business development
company.
Leverage
Risk.
To the extent that the Fund borrows money or utilizes certain derivatives, it
may be leveraged. Leveraging generally exaggerates the effect on net asset value
of any increase or decrease in the market value of the Fund’s portfolio
securities. The Fund is required to comply with the derivatives rule when it
engages in transactions that create future Fund payment or delivery obligations.
The Fund is required to comply with the asset coverage requirements under the
Investment Company Act of 1940 when it engages in borrowings and/or transactions
treated as borrowings.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Medium-Capitalization
Companies Risk. The
Fund may invest in medium-capitalization companies and, therefore will be
subject to certain risks associated with medium- capitalization companies. These
companies are often subject to less analyst coverage and may be in early and
less predictable periods of their corporate existences, with little or no record
of profitability. In addition, these companies often have greater price
volatility, lower trading volume and less liquidity than larger more established
companies. These companies tend to have smaller revenues, narrower product
lines, less management depth and experience, smaller shares of their product or
service markets, fewer financial resources and less competitive strength than
large-capitalization companies. Returns on investments in securities of
medium-capitalization companies could trail the returns on investments in
securities of larger companies.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Van
Eck Securities Corporation, the distributor of the Shares, does not maintain a
secondary market in the Shares. Investors purchasing and selling Shares in the
secondary market may not experience investment results consistent with those
experienced by those Authorized Participants creating and redeeming directly
with the Fund.
Decisions
by market makers or Authorized Participants to reduce their role or “step away”
from these activities in times of market stress could inhibit the effectiveness
of the arbitrage process in maintaining the relationship between the underlying
value of the Fund’s portfolio securities and the Fund’s market price. This
reduced effectiveness could result in Fund Shares trading at a price which
differs materially from net asset value and also in greater than normal intraday
bid/ask spreads for Fund Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified” fund under the Investment Company
Act of 1940. The Fund is subject to the risk that it will be more volatile than
a diversified fund because the Fund may invest a relatively high percentage of
its assets in a smaller number of issuers or may invest a larger proportion of
its assets in a single issuer. Moreover, the gains and losses on a single
investment may have a greater impact on the Fund’s net asset value and may make
the Fund more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if its Index is comprised of securities of a limited
number of companies.
Non-Diversification
Risk.
The Fund may become classified as “non-diversified” under the Investment Company
Act of 1940 solely as a result of a change in relative market capitalization or
index weighting of one or more constituents of the its Index. If the Fund
becomes non-diversified, it may invest a greater portion of its assets in
securities of a smaller number of individual issuers than a diversified fund. As
a result, changes in the market value of a single investment could cause greater
fluctuations in share price than would occur in a more diversified
fund.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on
market
and economic conditions, the Fund’s performance could be lower than funds that
may actively shift their portfolio assets to take advantage of market
opportunities or to lessen the impact of a market decline or a decline in the
value of one or more issuers.
Risk
of Investing in Other Funds.
The Fund may invest in shares of other funds, including ETFs. As a result, the
Fund will indirectly be exposed to the risks of an investment in the underlying
funds. Shares of other funds have many of the same risks as direct investments
in common stocks or bonds. In addition, the market value of such funds’ shares
is expected to rise and fall as the value of the underlying index or securities
rise and fall. If the shares of such funds are traded on a secondary market, the
market value of such funds’ shares may differ from the net asset value of the
particular fund. As a shareholder in a fund, the Fund will bear its ratable
share of the underlying fund’s expenses. At the same time, the Fund will
continue to pay its own investment management fees and other expenses. As a
result, the Fund and its shareholders will be absorbing duplicate levels of fees
with respect to investments in other funds, including ETFs. The expenses of such
underlying funds will not, however, be counted towards the Fund’s expense cap.
The Fund is subject to the conditions set forth in provisions of the Investment
Company Act of 1940 that limit the amount that the Fund and its affiliates, in
the aggregate, can invest in the outstanding voting securities of any one
investment company.
Shareholder
Risk. Certain
shareholders, including other funds advised by the Adviser, may from time to
time own a substantial amount of the Fund’s Shares. In addition, a third party
investor, the Adviser or an affiliate of the Adviser, an Authorized Participant,
a market maker, or another entity may invest in the Fund and hold its investment
for a limited period of time. There can be no assurance that any large
shareholder would not redeem its investment. Redemptions by shareholders could
have a negative impact on the Fund. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
exchange and may, therefore, have a material effect on the market price of the
Shares.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Social
Media Analytics Risk. The
Index provider relies heavily on social media analytics, which are relatively
new and untested. “Social media” is an umbrella term that encompasses various
activities that integrate technology, social interaction and content creation.
Investing in companies based on social media analytics involves the potential
risk of market manipulation because social media posts may be made with an
intent to inflate, or otherwise manipulate, the public perception of a company
stock or other investment. Although the Index provider attempts to mitigate the
potential risk of such manipulation by employing screens to identify posts which
may be computer generated or deceptive and by employing market capitalization
and trading volume criteria to remove companies which may be more likely targets
for such manipulation, there is no guarantee that the Index’s model will
successfully reduce such risk. Furthermore, text and sentiment analysis of
social media postings may prove inaccurate in predicting a company’s stock
performance; that is, high positive sentiment may not correlate with positive
change in the value of a company’s stock and low positive or negative sentiment
may not correlate with negative change in the value of a company’s stock.
Additionally, social media companies are susceptible to the following risks
which may disrupt the Index provider’s ability to receive meaningful data from
such sites: permanent cessation of operations, disruption in service caused by
hardware or software failure, interruptions or delays in service by third-party
data center hosting facilities and maintenance providers, security breaches
involving certain private, sensitive, proprietary and confidential information
managed and transmitted by social media companies, and privacy concerns and
laws, evolving internet regulation and other foreign or domestic regulations
that may limit or otherwise affect the operations of social media
companies.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Economic events in any one Asian country can have a
significant effect on the entire Asian region as well as on major trading
partners outside Asia, and any adverse effect on some or all of the Asian
countries and regions in which the Fund invests. The securities markets in some
Asian economies are relatively underdeveloped and may subject the Fund to higher
action costs or greater uncertainty than investments in more developed
securities markets. Such risks may adversely affect the value of the Fund’s
investments.
Governments
of many Asian countries have implemented significant economic reforms in order
to liberalize trade policy, promote foreign investment in their economies,
reduce government control of the economy and develop market mechanisms. There
can be no assurance these reforms will continue or that they will be effective.
Despite recent reform and privatizations, significant regulation of investment
and industry is still pervasive in many Asian countries and may restrict foreign
ownership of domestic corporations and repatriation of assets, which may
adversely affect the Fund’s investments. Governments in some Asian countries are
authoritarian in nature, have been installed or removed as a result of military
coups or have periodically used force to suppress
civil
dissent. Disparities of wealth, the pace and success of democratization, and
ethnic, religious and racial disaffection have led to social turmoil, violence
and labor unrest in some countries. Unanticipated or sudden political or social
developments may result in sudden and significant investment losses. Investing
in certain Asian countries involves risk of loss due to expropriation,
nationalization, or confiscation of assets and property or the imposition of
restrictions on foreign investments and on repatriation of capital invested. In
addition, several countries in Asia may be impacted by the occurrence of global
events such as war, terrorism, environmental disasters, natural disasters or
events, country instability, and infectious disease epidemics and
pandemics.
Special
Risk Considerations of Investing in Chinese Issuers. Investments
in securities of Chinese issuers, including issuers outside of China, involve
certain risks and considerations not typically associated with investments in
U.S securities. These risks include among others (i) more frequent (and
potentially widespread) trading suspensions and government interventions with
respect to Chinese issuers resulting in a lack of liquidity and in price
volatility, (ii) currency revaluations and other currency exchange rate
fluctuations or blockage, (iii) the nature and extent of intervention by the
Chinese government in the Chinese securities markets, whether such intervention
will continue and the impact of such intervention or its discontinuation, (iv)
the risk of nationalization or expropriation of assets, (v) the risk that the
Chinese government may decide not to continue to support economic reform
programs, (vi) limitations on the use of brokers, (vii) higher rates of
inflation, (viii) greater political, economic and social uncertainty, (ix)
market volatility caused by any potential regional or territorial conflicts or
natural or other disasters, and (x) the risk of increased trade tariffs,
embargoes, sanctions investment restrictions and other trade limitations.
Certain securities are, or may in the future become restricted, and the Fund may
be forced to sell such securities and incur a loss as a result. In addition, the
economy of China differs, often unfavorably, from the U.S. economy in such
respects as structure, general development, government involvement, wealth
distribution, rate of inflation, growth rate, interest rates, allocation of
resources and capital reinvestment, among others. The Chinese central government
has historically exercised substantial control over virtually every sector of
the Chinese economy through administrative regulation and/or state ownership and
actions of the Chinese central and local government authorities continue to have
a substantial effect on economic conditions in China. In addition, the Chinese
government has from time to time taken actions that influence the prices at
which certain goods may be sold, encourage companies to invest or concentrate in
particular industries, induce mergers between companies in certain industries
and induce private companies to publicly offer their securities to increase or
continue the rate of economic growth, control the rate of inflation or otherwise
regulate economic expansion. The Chinese government may do so in the future as
well, potentially having a significant adverse effect on economic conditions in
China.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in an European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. In a referendum held on June 23,
2016, voters in the United Kingdom voted to leave the European Union, creating
economic and political uncertainty in its wake. On January 31, 2020, the United
Kingdom officially withdrew from the European Union and the United Kingdom
entered a transition period which ended on December 31, 2020. On December 30,
2020, the European Union and United Kingdom signed the EU-UK Trade and
Cooperation Agreement, an agreement on the terms governing certain aspects of
the European Union’s and the United Kingdom’s relationship following the end of
the transition period. Notwithstanding the EU-UK Trade and Cooperation
Agreement, following the transition period, there is likely to be considerable
uncertainty as to the United Kingdom’s post-transition framework.
Responses
to the financial problems by European governments, central banks and others,
including austerity measures and reforms, may not work, may result in social
unrest and may limit future growth and economic recovery or have other
unintended consequences. The governments of European Union countries may be
subject to change and such countries may experience social and political unrest.
Unanticipated or sudden political or social developments may result in sudden
and significant investment losses. The occurrence of terrorist incidents,
outbreaks of war or ongoing regional armed conflict throughout Europe also could
impact financial markets. Further defaults or restructurings by governments and
other entities of their debt could have additional adverse effects on economies,
financial markets and asset valuations around the world. In addition, one or
more countries may abandon the euro and/or withdraw from the European Union. The
impact of these actions, especially if they occur in a disorderly fashion, is
not clear but could be significant and far-reaching.
Special
Risk Considerations of Investing in United Kingdom Issuers. Investments
in securities of United Kingdom issuers, including issuers located outside of
the United Kingdom that generate significant revenues from the United Kingdom,
involve risks and special considerations not typically associated with
investments in the U.S. securities markets. Investments in United Kingdom
issuers may subject the Fund to regulatory, political, currency, security and
economic risks specific to the United Kingdom. The British economy relies
heavily on the export of financials to the United States and other European
countries. A prolonged slowdown in the financials sector may have a negative
impact on the British economy. In the past, the United Kingdom has been a target
of terrorism. Acts of terrorism in the United Kingdom or against British
interests abroad may cause uncertainty in the British financial markets and
adversely affect the performance of the issuers to which the Fund has exposure.
The British economy, along with the United States and certain other European
Union economies, experienced a significant economic slowdown during the recent
financial crisis. In a referendum held on June 23, 2016, voters in the United
Kingdom voted to leave the European Union, creating economic and political
uncertainty in its wake. On January 31, 2020, the United Kingdom officially
withdrew from the European Union. On December 30, 2020, the European Union and
United Kingdom signed the EU-UK Trade and Cooperation Agreement, an agreement on
the terms governing certain aspects of the European Union’s and the United
Kingdom’s relationship following the end of the transition period.
Notwithstanding the EU-UK Trade and Cooperation Agreement, following the
transition period, there is likely to be considerable uncertainty as to the
United Kingdom’s post-transition framework.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
U.S.
Treasury Bills Risk.
Direct obligations of the U.S. Treasury have historically involved little risk
of loss of principal if held to maturity. However, due to fluctuations in
interest rates, the market value of such securities may vary.
ADDITIONAL
NON-PRINCIPAL INVESTMENT STRATEGIES
Each
Fund may invest in securities not included in its respective Index, money market
instruments, including repurchase agreements or other funds which invest
exclusively in money market instruments, convertible securities, structured
notes (notes on which the amount of principal repayment and interest payments
are based on the movement of one or more specified factors, such as the movement
of a particular stock or stock index) and/or certain derivatives, which the
Adviser believes will help a Fund track its Index. Depositary receipts not
included in a Fund’s Index may be used by a Fund in seeking performance that
corresponds to its respective Index and in managing cash flows, and may count
towards compliance with the Fund’s 80% policy. Each Fund may also invest, to the
extent permitted by the Investment Company Act of 1940, in other affiliated and
unaffiliated funds, such as open-end or closed-end management investment
companies, including other ETFs.
BORROWING
MONEY
Each
Fund may borrow money from a bank up to a limit of one-third of the market value
of its assets. Each Fund has entered or intends to enter into a credit facility
to borrow money for temporary, emergency or other purposes, including the
funding of shareholder redemption requests, trade settlements and as necessary
to distribute to shareholders any income required to maintain such Fund’s status
as a regulated investment company. To the extent that a Fund borrows money, it
may be leveraged; at such times, the Fund will appreciate or depreciate in value
more rapidly than its Index. Leverage generally has the effect of increasing the
amount of loss or gain a Fund might realize, and may increase volatility in the
value of a Fund’s investments.
LENDING
PORTFOLIO SECURITIES
Each
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions desiring to borrow securities to complete transactions and for
other purposes. In connection with such loans, a Fund receives cash, U.S.
government securities and stand-by letters of credit not issued by the Funds’
bank lending agent equal to at least 102% of the value of the portfolio
securities being loaned. This collateral is marked-to-market on a daily basis.
Although a Fund will receive collateral in connection with all loans of its
securities holdings, the Fund would be exposed to a risk of loss should a
borrower fail to return the borrowed securities (e.g.,
the Fund would have to buy replacement securities and the loaned securities may
have appreciated beyond the value of the collateral held by the Fund) or become
insolvent. A Fund may pay fees to the party arranging the loan of securities. In
addition, a Fund will bear the risk that it may lose money because the borrower
of the loaned securities fails to return the securities in a timely manner or at
all. A Fund could also lose money in the event of a decline in the value of any
cash collateral or in the value of the investments made with the cash
collateral. These events could trigger adverse tax consequences for a Fund.
Substitute payments for dividends received by a Fund for securities loaned out
by the Fund will not be considered qualified dividend income.
Unlike
many conventional mutual funds which are only bought and sold at closing NAVs,
the Shares of the Funds have been designed to be tradable in a secondary market
on an intra-day basis and to be created and redeemed principally in-kind, except
for VanEck Morningstar Global Wide Moat ETF and VanEck Morningstar International
Moat ETF whose shares are created and redeemed partially for cash, in Creation
Units at each day’s market close. These in-kind arrangements are designed to
mitigate the adverse effects on a Fund’s portfolio that could arise from
frequent cash purchase and redemption transactions that affect the NAV of the
Fund. Moreover, in contrast to conventional mutual funds, where frequent
redemptions can have an adverse tax impact on taxable shareholders because of
the need to sell portfolio securities which, in turn, may generate taxable gain,
the in-kind redemption mechanism of the Funds, to the extent used, generally is
not expected to lead to a tax event for shareholders whose Shares are not being
redeemed.
A
description of each Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio securities is available in the Funds’
SAI.
Board
of Trustees.
The Board of Trustees of the Trust has responsibility for the general oversight
of the management of the Funds, including general supervision of the Adviser and
other service providers, but is not involved in the day-to-day management of the
Trust. A list of the Trustees and the Trust officers, and their present
positions and principal occupations, is provided in the Funds’ SAI.
Investment
Adviser.
Under the terms of an investment management agreement between the Trust and Van
Eck Associates Corporation with respect to the Fund (the “Investment Management
Agreement”), Van Eck Associates Corporation serves as the adviser to the Fund
and, subject to the supervision of the Board of Trustees, is responsible for the
day-to-day investment management of the Fund. As of December 31, 2022, the
Adviser managed approximately $69.03 billion in assets. The Adviser has been an
investment adviser since 1955 and also acts as adviser or sub-adviser to mutual
funds, other ETFs, other pooled investment vehicles and separate accounts. The
Adviser’s principal business address is 666 Third Avenue, 9th Floor, New York,
New York 10017. A discussion regarding the Board of Trustees’ approval of the
Investment Management Agreement will be available in the Trust’s annual report
for the period ended September 30, 2022.
For
the services provided to each of VanEck Morningstar ESG Moat ETF, VanEck
Morningstar Global Wide Moat ETF, VanEck Morningstar Wide Moat ETF, VanEck
Morningstar International Moat ETF, VanEck Morningstar SMID Moat ETF and VanEck
Long/Flat Trend ETF under the Investment Management Agreement, each Fund pays
the Adviser monthly fees based on a percentage of each Fund’s average daily net
assets at the annual rate of 0.45% (with respect to VanEck Morningstar ESG Moat
ETF, VanEck Morningstar Global Wide Moat ETF, VanEck Morningstar SMID Moat ETF
and VanEck Morningstar Wide Moat ETF) and 0.50% (with respect to VanEck
Morningstar International Moat ETF and VanEck Long/Flat Trend ETF). From time to
time, the Adviser may waive all or a portion of its fee. Until at least February
1, 2024, the Adviser has agreed to waive fees and/or pay Fund expenses to the
extent necessary to prevent the operating expenses of each Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.49% (with respect to VanEck Morningstar
ESG Moat ETF, VanEck Morningstar SMID Moat ETF and VanEck Morningstar Wide Moat
ETF), 0.52% (with respect to VanEck Morningstar Global Wide Moat ETF), 0.55%
(with respect to VanEck Long/Flat Trend ETF) and 0.56% (with respect to VanEck
Morningstar International Moat ETF), of its average daily net assets per
year.
Each
of VanEck Long/Flat Trend ETF, VanEck Morningstar ESG Moat ETF, VanEck
Morningstar Global Wide Moat ETF, VanEck Morningstar International Moat ETF,
VanEck Morningstar SMID Moat ETF and VanEck Morningstar Wide Moat ETF is
responsible for all of its expenses, including the investment advisory fees,
costs of transfer agency, custody, legal, audit and other services, interest,
taxes, any distribution fees or expenses, offering fees or expenses and
extraordinary expenses.
Pursuant
to the Investment Management Agreement, the Adviser is responsible for all
expenses of VanEck Durable High Dividend ETF and VanEck Social Sentiment ETF,
including the costs of transfer agency, custody, fund administration, legal,
audit and other services, except for the fee payment under the Investment
Management Agreement, acquired fund fees and expenses, interest expense,
offering costs, trading expenses, taxes and extraordinary expenses. For its
services to VanEck Durable High Dividend ETF and VanEck Social Sentiment ETF,
each Fund has agreed to pay the Adviser an annual unitary management fee equal
to 0.29% and 0.75%, respectively, of its average daily net assets. Offering
costs excluded from the annual unitary management fee are: (a) legal fees
pertaining to a Fund’s Shares offered for sale; (b) SEC and state registration
fees; and (c) initial fees paid for Shares of a Fund to be listed on an
exchange. Notwithstanding the foregoing, the Adviser has agreed to pay all such
offering costs until at least February 1, 2024 with respect to VanEck Durable
High Dividend ETF and VanEck Social Sentiment ETF. In addition, for VanEck
Social Sentiment ETF, the Adviser has contractually agreed to waive or reduce
its management fees and/or pay Fund expenses in an amount equal to the Fund’s
extraordinary legal expenses up to $500,000 until at least February 1, 2024, and
prior to such date the Adviser may not terminate this arrangement without the
approval of the Fund’s Board of Trustees.
Manager
of Managers Structure.
With respect to VanEck Durable High Dividend ETF, VanEck Long/Flat Trend ETF,
VanEck Morningstar ESG Moat ETF, VanEck Morningstar Global Wide Moat ETF, VanEck
Morningstar International Moat ETF, VanEck Morningstar SMID Moat ETF and VanEck
Social Sentiment ETF the Adviser and the Trust may rely on an exemptive order
(the “Order”) from the SEC that permits the Adviser to enter into investment
sub-advisory agreements with unaffiliated sub-advisers without obtaining
shareholder approval. The Adviser, subject to the review and approval of the
Board of Trustees, may select one or more sub-advisers for the Funds and
supervise, monitor and evaluate the performance of each
sub-adviser.
The
Order also permits the Adviser, subject to the approval of the Board of
Trustees, to replace sub-advisers and amend investment sub-advisory agreements,
including applicable fee arrangements, without shareholder approval whenever the
Adviser and the Board of Trustees believe such action will benefit the Funds and
their shareholders. The Adviser thus would have the
responsibility
(subject to the oversight of the Board of Trustees) to recommend the hiring and
replacement of sub-advisers as well as the discretion to terminate any
sub-adviser and reallocate a Fund’s assets for management among any other
sub-adviser(s) and itself. This means that the Adviser would be able to reduce
the sub-advisory fees and retain a larger portion of the management fee, or
increase the sub-advisory fees and retain a smaller portion of the management
fee. The Adviser would compensate each sub-adviser out of its management
fee.
Administrator,
Custodian and Transfer Agent.
Van
Eck Associates Corporation is the administrator for the Funds (the
“Administrator”), and State Street Bank and Trust Company is the custodian of
each Fund’s assets and provides transfer agency and fund accounting services to
the Funds. The Administrator is responsible for certain clerical, recordkeeping
and/or bookkeeping services which are required to be provided pursuant to the
Investment Management Agreement.
Distributor.
Van Eck Securities Corporation is the distributor of the Shares (the
"Distributor"). The Distributor will not distribute Shares in less than a
specified number of Shares, each called a "Creation Unit," and does not maintain
a secondary market in the Shares. The Shares are traded in the secondary market.
The
portfolio manager who currently is responsible for the day-to-day management of
the Fund’s portfolio is Peter H. Liao, CFA. Mr. Liao has been employed by the
Adviser as an analyst since the summer of 2004 and has been a portfolio manager
since 2006. Mr. Liao graduated from New York University in 2004 with a Bachelor
of Arts in Economics and Mathematics. Mr. Liao serves as portfolio manager for
certain other investment companies and pooled investment vehicles advised by the
Adviser.
See
the Fund’s SAI for additional information about the portfolio manager’s
compensation, other accounts managed by the portfolio manager and his ownership
of Shares.
DETERMINATION
OF NAV
The
NAV per Share for each Fund is computed by dividing the value of the net assets
of the Fund (i.e.,
the value of its total assets less total liabilities) by the total number of
Shares outstanding. Expenses and fees, including the management fee, are accrued
daily and taken into account for purposes of determining NAV. The NAV of each
Fund is determined each business day as of the close of trading (ordinarily 4:00
p.m., Eastern time) on the New York Stock Exchange.
The
values of each Fund’s portfolio securities are based on the securities’ closing
prices on the markets on which the securities trade, when available. Due to the
time differences between the United States and certain countries in which
certain Funds invest, securities on these exchanges may not trade at times when
Shares of the Fund will trade. In the absence of a last reported sales price, or
if no sales were reported, and for other assets for which market quotes are not
readily available, values may be based on quotes obtained from a quotation
reporting system, established market makers or by an outside independent pricing
service. Debt instruments with remaining maturities of more than 60 days are
valued at the evaluated mean price provided by an outside independent pricing
service. If an outside independent pricing service is unable to provide a
valuation, the instrument is valued at the mean of the highest bid and the
lowest asked quotes obtained from one or more brokers or dealers selected by the
Adviser. Prices obtained by an outside independent pricing service may use
information provided by market makers or estimates of market values obtained
from yield data related to investments or securities with similar
characteristics and may use a computerized grid matrix of securities and its
evaluations in determining what it believes is the fair value of the portfolio
securities. Short-term debt instruments having a maturity of 60 days or less are
valued at amortized cost. Any assets or liabilities denominated in currencies
other than the U.S. dollar are converted into U.S. dollars at the current market
rates on the date of valuation as quoted by one or more sources. If a market
quotation for a security or other asset is not readily available or the Adviser
believes it does not otherwise accurately reflect the market value of the
security or asset at the time a Fund calculates its NAV, the security or asset
will be fair valued by the Adviser in accordance with the Trust’s valuation
policies and procedures approved by the Board of Trustees. Each Fund may also
use fair value pricing in a variety of circumstances, including but not limited
to, situations when the value of a security in the Fund’s portfolio has been
materially affected by events occurring after the close of the market on which
the security is principally traded (such as a corporate action or other news
that may materially affect the price of a security) or trading in a security has
been suspended or halted. In addition, each Fund that holds foreign equity
securities currently expects that it will fair value certain of the foreign
equity securities held by the Fund each day the Fund calculates its NAV, except
those securities principally traded on exchanges that close at the same time the
Fund calculates its NAV.
Accordingly,
a Fund’s NAV may reflect certain portfolio securities’ fair values rather than
their market prices at the time the exchanges on which they principally trade
close. Fair value pricing involves subjective judgments and it is possible that
a fair value determination for a security or other asset is materially different
than the value that could be realized upon the sale of such security or asset.
In addition, fair value pricing could result in a difference between the prices
used to calculate a Fund’s NAV and the prices used by such Fund’s Index. This
may adversely affect a Fund’s ability to track its Index. With respect to
securities that are principally traded on foreign exchanges, the value of a
Fund’s portfolio securities may change on days when you will not be able to
purchase or sell your Shares.
INTRADAY
VALUE
The
trading prices of the Funds’ Shares in the secondary market generally differ
from the Funds’ daily NAV and are affected by market forces such as the supply
of and demand for Fund Shares and underlying securities held by each Fund,
economic conditions and other factors. Information regarding the intraday value
of the Funds’ Shares (“IIV”) may be disseminated throughout each trading day by
the Exchange or by market data vendors or other information providers. The IIV
is based on the current market value of the securities and/or cash required to
be deposited in exchange for a Creation Unit. The IIV does not necessarily
reflect the precise composition of the current portfolio of securities held by
each Fund at a particular point in time or the best possible valuation of the
current portfolio. Therefore, the IIV should not be viewed as a “real-time”
update of the Funds’ NAV, which is computed only once a day. The IIV is
generally determined by using current market quotations and/or price quotations
obtained from broker-dealers and other market intermediaries that may trade in
the portfolio securities held by each Fund and valuations based on current
market rates. The quotations and/or valuations of certain Fund holdings may not
be updated during U.S. trading hours if such holdings do not trade in the United
States. Each Fund is not involved in, or responsible for, the calculation or
dissemination of the IIV and makes no warranty as to its accuracy.
RULE
144A AND OTHER UNREGISTERED SECURITIES
An
AP (i.e.,
a person eligible to place orders with the Distributor to create or redeem
Creation Units of a Fund) that is not a “qualified institutional buyer,” as such
term is defined under Rule 144A of the Securities Act of 1933, as amended (the
“Securities Act”), will not be able to receive, as part of a redemption,
restricted securities eligible for resale under Rule 144A or other unregistered
securities.
BUYING
AND SELLING EXCHANGE-TRADED SHARES
The
Shares of the Funds are listed on the Exchange. If you buy or sell Shares in the
secondary market, you will incur customary brokerage commissions and charges and
may pay some or all of the “spread,” which is any difference between the bid
price and the ask price. The spread varies over time for a Fund’s Shares based
on a Fund’s trading volume and market liquidity, and is generally lower if the
Funds have high trading volume and market liquidity, and generally higher if the
Funds have little trading volume and market liquidity (which is often the case
for funds that are newly launched or small in size). In times of severe market
disruption or low trading volume in a Fund’s Shares, this spread can increase
significantly. It is anticipated that the Shares will trade in the secondary
market at prices that may differ to varying degrees from the NAV of the Shares.
During periods of disruptions to creations and redemptions or the existence of
extreme market volatility, the market prices of Shares are more likely to differ
significantly from the Shares’ NAV.
The
Depository Trust Company (“DTC”) serves as securities depository for the Shares.
(The Shares may be held only in book- entry form; stock certificates will not be
issued.) DTC, or its nominee, is the record or registered owner of all
outstanding Shares. Beneficial ownership of Shares will be shown on the records
of DTC or its participants (described below). Beneficial owners of Shares are
not entitled to have Shares registered in their names, will not receive or be
entitled to receive physical delivery of certificates in definitive form and are
not considered the registered holder thereof. Accordingly, to exercise any
rights of a holder of Shares, each beneficial owner must rely on the procedures
of: (i) DTC; (ii) “DTC Participants,” i.e.,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom (and/or their representatives) own
DTC; and (iii) “Indirect Participants,” i.e.,
brokers, dealers, banks and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly,
through which such beneficial owner holds its interests. The Trust understands
that under existing industry practice, in the event the Trust requests any
action of holders of Shares, or a beneficial owner desires to take any action
that DTC, as the record owner of all outstanding Shares, is entitled to take,
DTC would authorize the DTC Participants to take such action and that the DTC
Participants would authorize the Indirect Participants and beneficial owners
acting through such DTC Participants to take such action and would otherwise act
upon the instructions of beneficial owners owning through them. As described
above, the Trust recognizes DTC or its nominee as the owner of all Shares for
all purposes. For more information, see the section entitled “Book Entry Only
System” in the Funds’ SAI.
The
Exchange is open for trading Monday through Friday and is closed on weekends and
the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’
Day, Good Friday, Memorial Day, Juneteenth National Independence Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Because
non-U.S. exchanges may be open on days when a Fund does not price its Shares,
the value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell a Fund’s Shares.
The
right of redemption by an AP may be suspended or the date of payment postponed
(1) for any period during which the Exchange is closed (other than customary
weekend and holiday closings); (2) for any period during which trading on the
Exchange is suspended or restricted; (3) for any period during which an
emergency exists as a result of which disposal of the Shares of a Fund or
determination of its NAV is not reasonably practicable; or (4) in such other
circumstance as is permitted by the SEC.
Market
Timing and Related Matters.
The Funds impose no restrictions on the frequency of purchases and redemptions.
Frequent purchases and redemptions of Fund Shares may attempt to take advantage
of a potential arbitrage opportunity presented by a lag between a change in the
value of a Fund’s portfolio securities after the close of the primary markets
for a Fund’s portfolio securities and the reflection of that change in a Fund’s
NAV (“market timing”). The Board of Trustees considered the nature of each Fund
(i.e.,
a fund whose shares are expected to trade intraday), that the Adviser monitors
the trading activity of APs for patterns of abusive trading, that the Funds
reserve the right to reject orders that may be disruptive to the management of
or otherwise not in the Funds’ best interests, and that each Fund may fair value
certain of its securities. Given this structure, the Board of Trustees
determined that it is not necessary to impose restrictions on the frequency of
purchases and redemptions for the Funds at the present time.
DISTRIBUTIONS
Net
Investment Income and Capital Gains.
As a shareholder of a Fund, you are entitled to your share of such Fund’s
distributions of net investment income and net realized capital gains on its
investments. Each Fund pays out substantially all of its net earnings to its
shareholders as “distributions.”
Each
Fund typically earns income dividends from stocks and interest from debt
securities. These amounts, net of expenses, are typically passed along to Fund
shareholders as dividends from net investment income. Each Fund realizes capital
gains or losses whenever it sells securities. Net capital gains are distributed
to shareholders as “capital gain distributions.” Distributions from a Fund's net
investment income, including net short term capital gains, if any, are taxable
to you as ordinary income. Any long term capital gains distributions you receive
from a Fund are taxable as long term capital gains.
Net
investment income, if any, is typically distributed to shareholders quarterly
for VanEck Durable High Dividend ETF and at least annually for all other Funds.
Net realized capital gains, if any, are typically distributed to shareholders at
least annually for all Funds. Dividends may be declared and paid more frequently
to improve index tracking or to comply with the distribution requirements of the
Internal Revenue Code. In addition, in situations where a Fund acquires
investment securities after the beginning of a dividend period, a Fund may elect
to distribute at least annually amounts representing the full dividend yield net
of expenses on the underlying investment securities, as if the Fund owned the
underlying investment securities for the entire dividend period. If the Fund so
elects, some portion of each distribution may result in a return of capital,
which, for tax purposes, is treated as a return of your investment in Shares.
You will be notified regarding the portion of the distribution which represents
a return of capital.
Distributions
in cash may be reinvested automatically in additional Shares of a Fund only if
the broker through which you purchased Shares makes such option
available.
TAX
INFORMATION
As
with any investment, you should consider how your Fund investment will be taxed.
The tax information in this Prospectus is provided as general information. You
should consult your own tax professional about the tax consequences of an
investment in a Fund, including the possible application of foreign, state and
local taxes. Unless your investment in a Fund is through a tax-exempt entity or
tax-deferred retirement account, such as a 401(k) plan, you need to be aware of
the possible tax consequences when: (i) a Fund makes distributions, (ii) you
sell Shares in the secondary market or (iii) you create or redeem Creation
Units.
Taxes
on Distributions.
As noted above, each Fund expects to distribute net investment income, if any,
at least annually (except for VanEck Durable High Dividend ETF, which expects to
distribute net investment income, if any, at least quarterly), and any net
realized long-term or short-term capital gains, if any, annually. Each Fund may
also pay a special distribution at any time to comply with U.S. federal tax
requirements.
In
general, your distributions are subject to U.S. federal income tax when they are
paid, whether you take them in cash or reinvest them in the Fund. Distributions
of net investment income, including net short-term gains, if any, are generally
taxable as ordinary income. Whether distributions of capital gains represent
long-term or short-term capital gains is determined by how long the Fund owned
the investments that generated them, rather than how long you have owned your
Shares. Distributions of net short-term capital gains in excess of net long–term
capital losses, if any, are generally taxable as ordinary income. Distributions
of net long-term capital gains in excess of net short-term capital losses, if
any, that are properly reported as capital gain dividends are generally taxable
as long-term capital gains. Long-term capital gains of a non-corporate
shareholder are generally taxable at a maximum rate of 15% or 20%, depending on
whether the shareholder’s income exceeds certain threshold amounts.
The
Funds may receive dividends, the distribution of which a Fund may report as
qualified dividends. In the event that a Fund receives such a dividend and
reports the distribution of such dividend as a qualified dividend, the dividend
may be taxed at the maximum capital gains rates of 15% or 20%, provided holding
period and other requirements are met at both the shareholder and the Fund
level. There can be no assurance that any significant portion of a Fund’s
distributions will be eligible for qualified dividend treatment.
Distributions
in excess of a Fund’s current and accumulated earnings and profits are treated
as a tax-free return of your investment to the extent of your basis in the
Shares, and generally as capital gain thereafter. A return of capital, which for
tax purposes is treated as a return of your investment, reduces your basis in
Shares, thus reducing any loss or increasing any gain on a subsequent taxable
disposition of Shares. A distribution will reduce a Fund’s NAV per Share and may
be taxable to you as ordinary income or capital gain even though, from an
economic standpoint, the distribution may constitute a return of
capital.
Dividends,
interest and gains from non-U.S. investments of a Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may, in some cases, reduce or
eliminate such taxes.
If
more than 50% of a Fund’s total assets at the end of its taxable year consist of
foreign securities, the Fund may elect to “pass through” to its investors
certain foreign income taxes paid by the Fund, with the result that each
investor will (i) include in gross income, even though not actually received,
the investor’s pro rata share of the Fund’s foreign income taxes, and (ii)
either deduct (in calculating U.S. taxable income) or credit (in calculating
U.S. federal income), subject to certain holding period and other limitations,
the investor’s pro rata share of the Fund’s foreign income taxes. It is expected
that more than 50% of VanEck Morningstar International Moat ETF’s assets will
consist of foreign securities.
Each
Fund may make investments in companies classified as passive foreign investment
companies ("PFICs") for U.S. federal income tax purposes. Investments in PFICs
are subject to special tax rules which may result in adverse tax consequences to
the Fund and its shareholders. Each Fund generally intends to elect to “mark to
market” these investments at the end of each taxable year. By making this
election, a Fund will recognize as ordinary income any increase in the value of
such shares as of the close of the taxable year over their adjusted basis and as
ordinary loss any decrease in such investment (but only to the extent of prior
income from such investment under the mark to market rules). Gains realized with
respect to a disposition of a PFIC that a Fund has elected to mark to market
will be ordinary income. By making the mark to market election, a Fund may
recognize income in excess of the distributions that it receives from its
investments. Accordingly, a Fund may need to borrow money or dispose of some of
its investments in order to meet its distribution requirements. If a Fund does
not make the mark to market election with
respect
to an investment in a PFIC, the Fund could become subject to U.S. federal income
tax with respect to certain distributions from, and gain on the dispositions of,
the PFIC which cannot be avoided by distributing such amounts to the Fund’s
shareholders.
Backup
Withholding.
Each Fund may be required to withhold a percentage of your distributions and
proceeds if you have not provided a taxpayer identification number or social
security number or otherwise established a basis for exemption from backup
withholding. The backup withholding rate for individuals is currently 24%. This
is not an additional tax and may be refunded, or credited against your U.S.
federal income tax liability, provided certain required information is furnished
to the Internal Revenue Service.
Taxes
on the Sale or Cash Redemption of Exchange Listed Shares.
Currently, any capital gain or loss realized upon a sale of Shares is generally
treated as long-term capital gain or loss if the Shares have been held for more
than one year and as a short-term capital gain or loss if held for one year or
less. However, any capital loss on a sale of Shares held for six months or less
is treated as long-term capital loss to the extent that capital gain dividends
were paid with respect to such Shares. The ability to deduct capital losses may
be limited. To the extent that a Fund shareholder’s Shares are redeemed for
cash, this is normally treated as a sale for tax purposes.
Taxes
on Creations and Redemptions of Creation Units.
A person who exchanges securities for Creation Units generally will recognize a
gain or loss. The gain or loss will be equal to the difference between the
market value of the Creation Units at the time of exchange and the sum of the
exchanger’s aggregate basis in the securities surrendered and the amount of any
cash paid for such Creation Units. A person who exchanges Creation Units for
securities will generally recognize a gain or loss equal to the difference
between the exchanger’s basis in the Creation Units and the sum of the aggregate
market value of the securities received. The IRS, however, may assert that a
loss realized upon an exchange of primarily securities for Creation Units cannot
be deducted currently under the rules governing “wash sales,” or on the basis
that there has been no significant change in economic position. Persons
exchanging securities for Creation Units or redeeming Creation Units should
consult their own tax adviser with respect to whether wash sale rules apply and
when a loss might be deductible and the tax treatment of any creation or
redemption transaction.
Under
current U.S. federal income tax laws, any capital gain or loss realized upon a
redemption (or creation) of Creation Units held as capital assets is generally
treated as long-term capital gain or loss if the Shares (or securities
surrendered) have been held for more than one year and as a short-term capital
gain or loss if the Shares (or securities surrendered) have been held for one
year or less.
If
you create or redeem Creation Units, you will be sent a confirmation statement
showing how many Shares you created or sold and at what price.
Medicare
Tax.
An additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from a
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person’s
“modified adjusted gross income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds certain threshold
amounts.
Non-U.S.
Shareholders.
Dividends paid by a Fund to non-U.S. shareholders are generally subject to
withholding tax at a 30% rate or a reduced rate specified by an applicable
income tax treaty to the extent derived from investment income and short-term
capital gains. Dividends paid by a Fund from net tax-exempt income or long-term
capital gains are generally not subject to such withholding tax.
Properly-reported dividends are generally exempt from U.S. federal withholding
tax where they (i) are paid in respect of a Fund’s “qualified net interest
income” (generally, a Fund’s U.S. source interest income, other than certain
contingent interest and interest from obligations of a corporation or
partnership in which a Fund is at least a 10% shareholder, reduced by expenses
that are allocable to such income); or (ii) are paid in respect of a Fund’s
“qualified short-term capital gains” (generally, the excess of a Fund’s net
short-term capital gain over a Fund’s long-term capital loss for such taxable
year). However, depending on its circumstances, a Fund may report all, some or
none of its potentially eligible dividends as such qualified net interest income
or as qualified short-term capital gains and/or treat such dividends, in whole
or in part, as ineligible for this exemption from withholding.
Any
capital gain realized by a Non-U.S. shareholder upon a sale of Shares of a Fund
will generally not be subject to U.S. federal income or withholding tax unless
(i) the gain is effectively connected with the shareholder’s trade or business
in the United States, or in the case of a shareholder who is a nonresident alien
individual, the shareholder is present in the United States for 183 days or more
during the taxable year and certain other conditions are met or (ii) the Fund is
or has been a U.S. real property holding corporation, as defined below, at any
time within the five-year period preceding the date of disposition of the Fund’s
Shares or, if shorter, within the period during which the Non-U.S. shareholder
has held the Shares. Generally, a corporation is a U.S. real property holding
corporation if the fair market value of its U.S. real property interests, as
defined in the Internal Revenue Code and applicable regulations, equals or
exceeds 50% of the aggregate fair market value of its worldwide real property
interests and its other assets used or held for use in a trade or business. A
Fund may be, or may prior to a Non-U.S. shareholder's disposition of Shares
become, a U.S. real property holding corporation. If a Fund is or becomes a U.S.
real property holding corporation, so long as the Fund’s Shares are regularly
traded on an established securities market, only a Non-U.S. shareholder who
holds or held (at any time during the shorter of the five-year period preceding
the date of disposition or the holder’s holding period) more than 5%
(directly
or indirectly as determined under applicable attribution rules of the Internal
Revenue Code) of the Fund’s Shares will be subject to United States federal
income tax on the disposition of Shares.
As
part of the Foreign Account Tax Compliance Act, (“FATCA”), a Fund may be
required to withhold 30% tax on certain types of U.S. sourced income
(e.g.,
dividends, interest, and other types of passive income) paid to (i) foreign
financial institutions (“FFIs”), including non-U.S. investment funds, unless
they agree to collect and disclose to the IRS information regarding their direct
and indirect U.S. account holders and (ii) certain nonfinancial foreign entities
(“NFFEs”), unless they certify certain information regarding their direct and
indirect U.S. owners. To avoid possible withholding, FFIs will need to enter
into agreements with the IRS which state that they will provide the IRS
information, including the names, account numbers and balances, addresses and
taxpayer identification numbers of U.S. account holders and comply with due
diligence procedures with respect to the identification of U.S. accounts as well
as agree to withhold tax on certain types of withholdable payments made to
non-compliant foreign financial institutions or to applicable foreign account
holders who fail to provide the required information to the IRS, or similar
account information and required documentation to a local revenue authority,
should an applicable intergovernmental agreement be implemented. NFFEs will need
to provide certain information regarding each substantial U.S. owner or
certifications of no substantial U.S. ownership, unless certain exceptions
apply, or agree to provide certain information to the IRS.
While
some parts of the FATCA rules have not been finalized, a Fund may be subject to
the FATCA withholding obligation, and also will be required to perform due
diligence reviews to classify foreign entity investors for FATCA purposes.
Investors are required to agree to provide information necessary to allow a Fund
to comply with the FATCA rules. If a Fund is required to withhold amounts from
payments pursuant to FATCA, investors will receive distributions that are
reduced by such withholding amounts.
Non-U.S.
shareholders are advised to consult their tax advisors with respect to the
particular tax consequences to them of an investment in the Funds, including the
possible applicability of the U.S. estate tax.
The
foregoing discussion summarizes some of the consequences under current U.S.
federal income tax law of an investment in a Fund. It is not a substitute for
personal tax advice. Consult your own tax advisor about the potential tax
consequences of an investment in a Fund under all applicable tax laws. Changes
in applicable tax authority could materially affect the conclusions discussed
above and could adversely affect the Funds, and such changes often
occur.
The
US Dividend Valuation Index, US Sustainability Moat Focus Index, Global Wide
Moat Focus Index, ex-US Moat Focus Index, US Small-Mid Cap Moat Focus Index and
Wide Moat Focus Index are published by Morningstar. The NDR CMG Index is
published by Ned Davis Research, Inc. (“NDR”). The Morningstar®
name and logo are registered trademarks of Morningstar. The Sentiment Leaders
Index is published by BUZZ Holdings ULC (“BUZZ Holdings”).
Morningstar®
US Dividend Valuation IndexSM,
Morningstar®
US
Sustainability Moat Focus IndexSM,
Morningstar®
Global Wide Moat Focus IndexSM,
Morningstar®
Global ex-US Moat Focus IndexSM,,
Morningstar®
US
Small-Mid Cap Moat Focus IndexSM
and
Morningstar®
Wide Moat Focus IndexSM
are service marks of Morningstar.
NDR,
BUZZ Holdings and Morningstar do not sponsor, endorse, or promote the Funds and
bear no liability with respect to the Funds or any security.
The
US Dividend Valuation Index is a rules-based index intended to offer exposure to
companies that Morningstar determines have a high dividend yield, strong
financial health and an attractive uncertainty-adjusted valuation. Companies are
selected by Morningstar from the universe of companies represented in the
Morningstar®
US Market IndexSM,
a broad market index representing 97% of U.S. market capitalization that meet
certain trading frequency, exchange listing and liquidity requirements. The US
Dividend Valuation Index targets a select group of eligible securities that
rank: (i) in the top 50% as measured by trailing twelve month dividend yield;
(ii) the top 50% of their peer group (there are two peer groups: companies that
belong to the financials sector of Morningstar and the rest of the eligible
universe) as measured by its distance to default score; and (iii) the top 70% of
Morningstar’s star score metric. An eligible security must meet each of these
three independent criteria to qualify for inclusion in the US Dividend Valuation
Index.
Morningstar’s
star score metric represents uncertainty-adjusted security valuation, which
reflects the relationship between a company’s market price and its fair value
(as determined by Morningstar’s standardized, proprietary valuation model).
Morningstar’s equity research team estimates the issuer’s future free cash flows
and then calculates an enterprise value using weighted average costs of capital
as the discount rate. Morningstar’s equity research team then assigns each
issuer’s common stock a fair value by adjusting the enterprise value to account
for net debt and other adjustments. A company’s fair value is used in
combination with Morningstar’s equity research team’s uncertainty rating to
assign a star score.
Distance
to default score is a measure of the financial stability of a company as
determined by recent market data and financial accounting reports. Morningstar’s
distance to default metric is a structural or contingent claim model that takes
advantage of both market information and accounting financial information to
determine the expectation that default will occur. Morningstar defines two
distance to default peer groups when constructing the US Dividend Valuation
Index, companies that belong to Morningstar’s financials sector and the rest of
the eligible universe.
A
buffer rule is applied to the current US Dividend Valuation Index constituents.
A margin of 3% is applied to each selection criteria to reduce US Dividend
Valuation Index turnover and is applied to a security for a maximum of one
consecutive reconstitution. If a current US Dividend Valuation Index constituent
is ranked between 50% and 53% by dividend yield, 50% and 53% by distance to
default, or 70% to 73% by star score, and any such buffering clause did not
apply to that security at the previous reconstitution, the constituent will
remain in the US Dividend Valuation Index.
The
US Dividend Valuation Index is reconstituted and rebalanced semi-annually and
implemented after the close of business on the third Friday of March and
September. All reconstitution and rebalancing adjustments are effective on the
following Monday. If the Monday is a market holiday, reconstitution and
rebalancing occurs on the immediately following business day.
Reconstitution
and rebalancing data, including constituent weights and related information, is
posted on Morningstar’s website at the end of each semi-annual quarter-end
month. Target weights of the constituents are not otherwise adjusted between
quarters except in the event of certain types of corporate actions.
Morningstar
may delay or change a scheduled rebalancing or reconstitution of the US Dividend
Valuation Index or the implementation of certain rules at its sole
discretion.
The
NDR CMG Index is a rules-based index that follows a proprietary model developed
by Ned Davis Research, Inc. (“NDR”) in conjunction with Capital Management
Group, Inc. (“CMG”). To help limit potential loss associated with adverse market
conditions, the model produces trade signals to dictate the NDR CMG Index’s
equity allocation ranging from 100% fully invested (i.e.,
“long”) to 100% in cash (i.e.,
“flat”). When the NDR CMG Index is long, or 100% fully invested, it will be
allocated to the S&P 500 Index. When the NDR CMG Index is flat, or 100%
cash, it will be allocated to the Solactive 13-week U.S. T-bill Index. The
Solactive 13-week U.S. T-bill Index invests in one 13-week U.S. Treasury bill at
a time, and a maximum of five U.S. Treasury bills in a calendar year. When the
NDR CMG Index is not completely long or flat, 50% of it will be allocated to the
S&P 500 Index with the remaining 50% allocated to the Solactive 13-week U.S.
T-bill Index. The model produces daily trade signals to determine the NDR CMG
Index’s equity allocation percentage through a two-phase process. The first
phase produces an industry-level market breadth composite based on the S&P
500 industry groupings. As such, “market breadth” here refers to the aggregated
weighted score of advancing and declining industries, as measured by three types
of priced-based, industry-level indicators: trend-following, volatility and
mean-reversion. Trend-following primary indicators include momentum and various
moving average measures to assess the current direction of the markets.
Mean-reversion indicators are applied, which are based on the theory that prices
and returns eventually move back towards their historical mean (or average). The
volatility indicators determine whether near-term volatility has significantly
risen relative to longer-term volatility to measure whether broad market risks
have risen. The model applies these indicators across the S&P 500 industry
groupings to ultimately produce trade signals that are either bullish (meaning
prices increasing over time) or bearish (meaning prices decreasing over time).
The final market breadth composite is the scaled aggregation of these indicators
across the S&P 500 industries to determine the breadth composite score
(between 0 and 100). The second phase utilizes the breadth composite score to
produce the equity allocations for the NDR CMG Index. The composite score is
divided into three (3) zones (or ranges) which represent different market
scenarios ranging from bearish to bullish. The equity allocation percentage for
the NDR CMG Index based on this two-phase process is summarized as
follows:
|
|
|
|
|
|
Breadth
Composite Score |
S&P
500 Index Allocation Percentage |
At
or Above 50 |
100% |
35-50
(prior to crossing below 35) |
0% |
0-50
(after crossing below 35) |
50% |
The
model is automated and updates daily to take into account the various indicators
that dictate the trade signals referenced above. As such, the NDR CMG Index will
rebalance to new allocation percentages intra month when the trade signals
change based on the model’s composite score and direction. When the model
produces a 50% equity allocation percentage signal, the NDR CMG Index is
rebalanced accordingly at that time. From that point, the NDR CMG Index
allocations may drift above or below 50% until the model produces a new trade
signal. There is no allocation drift when the NDR CMG Index’s equity allocation
is 0% or 100%.
NDR
may delay or change a scheduled rebalancing or reconstitution of the NDR CMG
Index or the implementation of certain rules at its sole
discretion.
The
US Sustainability Moat Focus Index is a rules-based index intended to offer
exposure to companies that the Index provider determines have long-term
competitive advantages based on a proprietary methodology that considers
quantitative and qualitative factors (“wide moat companies”). Wide moat
companies are selected from the universe of companies represented in the
Morningstar®
US Market IndexSM,
a broad market index representing 97% of U.S. market capitalization. The US
Sustainability Moat Focus Index targets a select group of certain wide moat
companies that according to Morningstar’s equity research team are attractively
priced as of each US Sustainability Moat Focus Index review. Out of the
companies in the Morningstar US Market Index that the Index provider determines
are wide moat companies, the Index provider excludes those considered to have
severe or high ESG risk based on Morningstar’s Sustainalytics ESG Risk Rating.
The US Sustainability Moat Focus Index also excludes companies (i) involved in
the production or distribution of controversial weapons or civilian firearms,
(ii) involved in the extraction of or generation of power from thermal coal,
(iii) have a Sustainalytics controversy score of five ( out of a scale of 1 to
5) in the last three (3) years, (iv) those that have a severe or high Carbon
Risk Rating from Sustainalytics or (v) that have greater than 50% of revenues
from tobacco products. The Index provider then selects companies to be included
in the US Sustainability Moat Focus Index as determined by the ratio of the
Index provider’s estimate of fair value of the issuer’s common stock to the
price. If, after the preceding steps, the sustainability characteristics of the
US Sustainability Moat Focus Index appear at risk of reducing the Sustainability
Rating of a portfolio tracking the US Sustainability Moat Focus Index below Four
Globes, according to Morningstar’s Sustainability Rating system, the US
Sustainability Moat Focus Index will systematically reduce its ESG risk profile
in order to maintain a favorable Sustainability Rating.
A
selection committee, comprising members of Morningstar’s equity research team,
makes the final determination of whether a company is a wide moat company using
quantitative and qualitative factors.
A
buffer rule is applied to current US Sustainability Moat Focus Index
constituents. Those that are ranked in the top 150% of stocks representing the
lowest current market price/fair value price eligible for inclusion in the US
Sustainability Moat Focus Index are given preference over securities outside the
top 150%. The maximum weight of an individual sector in the US Sustainability
Moat Focus Index is capped at 10% more than its corresponding weight in the
Morningstar US Market Index at the time of reconstitution, or 40%, whichever is
higher.
The
US Sustainability Moat Focus Index employs a staggered rebalance methodology.
The US Sustainability Moat Focus Index is divided into two equally-weighted
sub-portfolios, and each is reconstituted and rebalanced annually, one in June
and the other in December. Due to the staggered rebalance methodology,
constituents and weightings may vary between sub-portfolios. Each sub-portfolio
is reweighted to 50% of the total US Sustainability Moat Focus Index every
twelve months.
Morningstar
may delay or change a scheduled rebalancing or reconstitution of the US
Sustainability Moat Focus Index or the implementation of certain rules at its
sole discretion.
The
Global Wide Moat Focus Index is a rules-based index intended to offer exposure
to companies that Morningstar determines have sustainable competitive advantages
based on a proprietary methodology that considers quantitative and qualitative
factors (“wide moat companies”). Wide moat companies are selected from the
universe of companies represented in the Parent Index, a broad market index
representing 97% of global market capitalization that meet certain trading
frequency, dollar trading volume and turnover and free-float
market-capitalization requirements. Each security that meets these general
criteria of the Parent Index are considered for inclusion in one of three
economic segment indexes: U.S., developed ex-U.S. or emerging. Subsequently,
individual indexes—such as the Global Wide Moat Focus Index—are derived from the
constituents of the Parent Index.
The
Global Wide Moat Focus Index targets a select group of wide moat companies:
those that according to Morningstar’s equity research team are attractively
priced as of each Global Wide Moat Focus Index review. Out of the companies in
the Global Wide Moat Focus Index that Morningstar determines are wide moat
companies, Morningstar selects companies to be included in the Global Wide Moat
Focus Index as determined by the ratio of the Morningstar’s estimate of fair
value of the issuer’s common stock to the price. Morningstar’s equity research
team’s fair value estimates are calculated using a standardized, proprietary
valuation model.
A
selection committee, comprising members of Morningstar’s equity research team,
makes the final determination of whether a company is a wide moat company. Only
those companies with one or more of the identifiable competitive advantages, as
determined by Morningstar’s equity research team and agreed to by the selection
committee, are wide moat companies. The quantitative factors used to identify
competitive advantages currently include historical and projected returns on
invested capital relative to cost of capital. The qualitative factors used to
identify competitive advantages currently include customer switching cost
(i.e.,
the costs of customers switching to competitors), internal cost advantages,
intangible assets (e.g.,
intellectual property and brands), network effects (i.e.,
whether products or services become more valuable as the number of customers
grows) and efficient scale (i.e.,
whether the company effectively serves a limited market that potential rivals
have little incentive to enter into).
Morningstar’s
equity research team uses a standardized, proprietary valuation model to assign
fair values to potential Global Wide Moat Focus Index constituents’ common
stock. Morningstar’s equity research team estimates the issuer’s future free
cash flows and then calculates an enterprise value using weighted average costs
of capital as the discount rate. Morningstar’s equity research team then assigns
each issuer’s common stock a fair value by adjusting the enterprise value to
account for net debt and other adjustments.
Morningstar
utilizes a momentum screen, in which momentum represents a security’s 12-month
price change. The momentum screen is used to exclude 20% of wide moat stocks in
the Global Wide Moat Focus Index with the worst 12-month momentum based on a
12-month price change of each stock. A buffer rule is applied to the current
Global Wide Moat Focus Index constituents. Those that are ranked in the top 200%
of stocks representing the lowest current market price/fair value price eligible
for inclusion in the Global Wide Moat Focus Index will remain in the Global Wide
Moat Focus Index at the time of reconstitution and those that fall outside of
the top 200% are excluded from the Global Wide Moat Focus Index. The maximum
weight of an individual country or sector in the Global Wide Moat Focus Index is
capped at 10% more than its corresponding weight in the Parent Index at the time
of reconstitution, or 40%, whichever is higher.
The
Global Wide Moat Focus Index employs a staggered rebalance methodology. The
Global Wide Moat Focus Index is divided into two equally-weighted
sub-portfolios, and each is reconstituted and rebalanced semi-annually on
alternating quarters. Each sub-portfolio will contain 50 equally-weighted
securities at its semi-annual reconstitution and weights will vary with market
prices until the next reconstitution date. Due to the staggered rebalance
methodology, constituents and weightings may vary between sub-portfolios. Each
sub-portfolio is reweighted to 50% of the total Global Wide Moat Focus Index
every six months. Adjustments to one sub-portfolio are performed after the close
of business on the third Friday of March and September and adjustments to the
other sub-portfolio are performed after the close of business on the third
Friday of June and December, and all adjustments are effective on the following
Monday. If the Monday is a market holiday, reconstitution and rebalancing occurs
on the immediately following business day.
Rebalancing
data, including constituent weights and related information, is posted on
Morningstar's website at the end of each quarter-end month. Target weights of
the constituents are not otherwise adjusted between quarters except in the event
of certain types of corporate actions.
Morningstar
may delay or change a scheduled rebalancing or reconstitution of the Global Wide
Moat Focus Index or the implementation of certain rules at its sole
discretion.
The
ex-US Moat Focus Index is a rules-based index intended to offer exposure to
companies that Morningstar determines to have sustainable competitive advantages
based on a proprietary methodology that considers quantitative and qualitative
factors (“wide and narrow moat companies”). Wide moat companies are those that
Morningstar’s equity research team believes will maintain its competitive
advantage(s) for at least 20 years. Narrow moat companies are those that
Morningstar’s equity research team believes will maintain its competitive
advantage(s) for at least 10 years. Wide and narrow moat companies are selected
from the universe of companies represented in the Morningstar®
Global Markets ex-US IndexSM
(the “Parent Index”), a broad market index representing 97% of developed ex-US
and emerging markets market capitalization. The ex-US Moat Focus Index targets a
select group of equity securities of wide and narrow moat companies: those that
according to Morningstar’s equity research team are attractively priced based on
the of the issuer’s common stock price to Morningstar’s equity research team’s
estimate of fair value at the time of each ex-US Moat Focus Index review.
Morningstar’s equity research team’s fair value estimates are calculated using a
standardized, proprietary valuation model.
A
selection committee, comprising members of Morningstar’s equity research team,
makes the final determination of whether a company is a wide or narrow moat
company. Only those companies with one or more of the identifiable competitive
advantages, as determined by Morningstar’s equity research team and agreed to by
the selection committee, are wide or narrow moat companies. The quantitative
factors used to identify competitive advantages include historical and projected
returns on invested capital relative to cost of capital. The qualitative factors
used to identify competitive advantages include customer switching cost
(i.e.,
the costs of customers switching to competitors), internal cost advantages,
intangible assets (e.g.,
intellectual property and brands), network effects (i.e.,
whether products or services become more valuable as the number of customers
grows) and efficient scale (i.e.,
whether the company effectively serves a limited market that potential rivals
have little incentive to enter into).
Morningstar’s
equity research team uses a standardized, proprietary valuation model to assign
fair values to potential ex-US Moat Focus Index constituents’ common stock.
Morningstar’s equity research team estimates the issuer’s future free cash flows
and then calculates an enterprise value using weighted average costs of capital
as the discount rate. Morningstar’s equity research team then assigns each
issuer’s common stock a fair value by adjusting the enterprise value to account
for net debt and other adjustments.
Morningstar
utilizes a momentum screen, in which momentum represents a security’s 12-month
price change. A momentum signal is used to exclude 20% of the wide and narrow
moat stocks in the Parent Index with the worst 12-month momentum based on a
12-month price change of each stock. A buffer rule is applied to the current
ex-US Moat Focus Index constituents. Those that are ranked in the top 150% of
the number of stocks eligible for the ex-US Moat Focus Index, as measured by
current market price/fair value will remain in the ex-US Moat Focus Index at the
time of reconstitution and those that fall outside of the top 150% are excluded
from the ex-US Moat Focus Index. The maximum weight of an individual country or
sector in the ex-US Moat Focus Index is capped at 10% more than its
corresponding weight in the Parent Index at the time of reconstitution, or 40%,
whichever is higher.
The
ex-US Moat Focus Index employs a staggered rebalance methodology. The ex-US Moat
Focus Index is divided into two equally-weighted sub-portfolios, each is
reconstituted and rebalanced semi-annually on alternating quarters. Each
sub-portfolio will contain 50 equally-weighted securities at its semi-annual
reconstitution and weights will vary with market prices until the next
reconstitution date. Due to the staggered rebalance methodology, constituents
and weightings may vary between sub-portfolios. Each sub-portfolio is reweighted
to 50% of the total ex-US Moat Focus Index every six months. Adjustments to one
sub-portfolio are performed after the close of business on the third Friday of
March and September and adjustments to the other sub-portfolio are performed
after the close of business on the third Friday of June and December and are
effective on the following Monday. If the Monday is a market holiday,
reconstitution and rebalancing occurs on the Tuesday immediately
following.
Rebalancing
data, including constituent weights and related information, is posted on
Morningstar’s website at the end of each quarter-end month. Target weights of
the constituents are not otherwise adjusted between quarters except in the event
of certain types of corporate actions.
Morningstar
may delay or change a scheduled rebalancing or reconstitution of the ex-US Moat
Focus Index or the implementation of certain rules at its sole
discretion.
The
US Small-Mid Cap Moat Focus Index is a rules-based index intended to offer
exposure to companies that Morningstar determines to have sustainable
competitive advantages based on a proprietary methodology that considers
quantitative and qualitative factors (“wide and narrow moat companies”). Wide
moat companies are those that Morningstar’s equity research team believes will
maintain their competitive advantage(s) for at least 20 years. Narrow moat
companies are those that Morningstar’s equity research team believes will
maintain their competitive advantage(s) for at least 10 years. Wide and narrow
moat companies are selected from the universe of companies represented in the
Parent Index, a broad market index representing small- and medium-capitalization
U.S. companies. Securities in this eligible universe are further screened for
liquidity and size. The US Small-Mid Cap Moat Focus Index targets a select group
of equity securities of wide and narrow moat companies: those that according to
Morningstar’s equity research team are attractively priced based on the issuer’s
common stock price as compared to Morningstar’s equity research team’s estimate
of fair value at the time of each index review. Morningstar’s equity research
team’s fair value estimates are calculated using a standardized, proprietary
valuation model.
A
selection committee, comprising members of Morningstar’s equity research team,
makes the final determination of whether a company is a wide or narrow moat
company. Only those companies with one or more of the identifiable competitive
advantages, as determined by Morningstar’s equity research team and agreed to by
the selection committee, are wide or narrow moat companies. The quantitative
factors used to identify competitive advantages include historical and projected
returns on invested capital relative to cost of capital. The qualitative factors
used to identify competitive advantages include customer switching cost
(i.e.,
the costs of customers switching to competitors), internal cost advantages,
intangible assets (e.g.,
intellectual property and brands), network effects (i.e.,
whether products or services become more valuable as the number of customers
grows) and efficient scale (i.e.,
whether the company effectively serves a limited market that potential rivals
have little incentive to enter into).
Morningstar’s
equity research team uses a standardized, proprietary valuation model to assign
fair values to potential US Small-Mid Cap Moat Focus Index constituents’ common
stock. Morningstar’s equity research team estimates the issuer’s future free
cash flows and then calculates an enterprise value using weighted average costs
of capital as the discount rate. Morningstar’s equity research team then assigns
each issuer’s common stock a fair value by adjusting the enterprise value to
account for net debt and other adjustments.
Morningstar
utilizes a momentum screen, in which momentum represents a security’s 12-month
price change. A momentum signal is used to exclude 20% of the wide and narrow
moat stocks in the Parent Index with the worst 12-month momentum based on a
12-month price change of each stock. A buffer rule is applied to the current
Index constituents. Those that are ranked in the top 150% of the number of
stocks eligible for the US Small-Mid Cap Moat Focus Index, as measured by
current market price/fair value will remain in the US Small-Mid Cap Moat Focus
Index at the time of reconstitution and those that fall outside of the top 150%
are excluded from the US Small-Mid Cap Moat Focus Index. The maximum weight of
an individual sector in the US Small-Mid Cap Moat Focus Index is capped at 10%
more than its corresponding weight in the Parent Index at the time of
reconstitution, or 40%, whichever is higher.
The
US Small-Mid Cap Moat Focus Index employs a staggered rebalance methodology. The
US Small-Mid Cap Moat Focus Index is divided into two equally-weighted
sub-portfolios, each is reconstituted and rebalanced semi-annually on
alternating quarters. Each sub-portfolio will contain 75 equally-weighted
securities at its semi-annual reconstitution and weights will vary with market
prices until the next reconstitution date. Due to the staggered rebalance
methodology, constituents and weightings may vary between sub-portfolios. Each
sub-portfolio is reweighted to 50% of the total Index every six months.
Adjustments to one sub-portfolio are performed after the close of business on
the third Friday of March and September and adjustments to the other
sub-portfolio are performed after the close of business on the third Friday of
June and December and are effective on the following Monday. If the Monday is a
market holiday, reconstitution and rebalancing occurs on the Tuesday immediately
following.
Rebalancing
data, including constituent weights and related information, is posted on
Morningstar’s website at the end of each quarter-end month. Target weights of
the constituents are not otherwise adjusted between quarters except in the event
of certain types of corporate actions.
Morningstar
may delay or change a scheduled rebalancing or reconstitution of the US
Small-Mid Cap Moat Focus Index or the implementation of certain rules at its
sole discretion.
The
Wide Moat Focus Index is a rules-based index intended to offer exposure to
companies that Morningstar determines have sustainable competitive advantages
based on a proprietary methodology that considers quantitative and qualitative
factors (“wide moat companies”). Wide moat companies are selected from the
universe of companies represented in the Morningstar®
US Market IndexSM,
a broad market index representing 97% of U.S. market capitalization. The Wide
Moat Focus Index targets a select group of wide moat companies: those that
according to Morningstar’s equity research team are attractively priced as of
each Wide Moat Focus Index review. Out of the companies in the Morningstar US
Market Index that Morningstar determines are wide moat companies, Morningstar
selects companies to be included in the Wide Moat Focus Index as determined by
the ratio of the Morningstar’s estimate of fair value of the issuer’s common
stock to the price. Morningstar’s equity research team’s fair value estimates
are calculated using a standardized, proprietary valuation model.
A
selection committee, comprising members of Morningstar’s equity research team,
makes the final determination of whether a company is a wide moat company. Only
those companies with one or more of the identifiable competitive advantages, as
determined by Morningstar’s equity research team and agreed to by the selection
committee, are wide moat companies. The quantitative factors used to identify
competitive advantages include historical and projected returns on invested
capital relative to cost of capital. The qualitative factors used to identify
competitive advantages include customer switching cost (i.e.,
the costs of customers switching to competitors), internal cost advantages,
intangible assets (e.g.,
intellectual property and brands), network effects (i.e.,
whether products or services become more valuable as the number of customers
grows) and efficient scale (i.e.,
whether the company effectively serves a limited market that potential rivals
have little incentive to enter into).
Morningstar’s
equity research team uses a standardized, proprietary valuation model to assign
fair values to potential Wide Moat Focus Index constituents’ common stock.
Morningstar’s equity research team estimates the issuer’s future free cash flows
and then calculates an enterprise value using weighted average costs of capital
as the discount rate. Morningstar’s equity research team then assigns each
issuer’s common stock a fair value by adjusting the enterprise value to account
for net debt and other adjustments.
A
buffer rule is applied to the current Wide Moat Focus Index constituents. Those
that are ranked in the top 150% of stocks representing the lowest current market
price/fair value price eligible for inclusion in the Wide Moat Focus Index will
remain in the Wide Moat Focus Index at the time of reconstitution and those that
fall outside of the top 150% are excluded from the Index. The maximum weight of
an individual sector in the Wide Moat Focus Index is capped at 10% more than its
corresponding weight in the Morningstar US Market Index at the time of
reconstitution, or 40%, whichever is higher.
The
Wide Moat Focus Index employs a staggered rebalance methodology. The Wide Moat
Focus Index is divided into two equally-weighted sub-portfolios, and each is
reconstituted and rebalanced semi-annually on alternating quarters. Each
sub-portfolio will contain 40 equally-weighted securities at its semi-annual
reconstitution and weights will vary with market prices until the next
reconstitution date. Due to the staggered rebalance methodology, constituents
and weightings may vary between sub-portfolios. Each sub-portfolio is reweighted
to 50% of the total Wide Moat Focus Index every six months. Adjustments to one
sub-portfolio are performed after the close of business on the third Friday of
March and September and adjustments to the other sub-portfolio are performed
after the close of business on the third Friday of June and December, and all
adjustments are effective on the following Monday. If the Monday is a market
holiday, reconstitution and rebalancing occurs on the Tuesday immediately
following.
Rebalancing
data, including constituent weights and related information, is posted on
Morningstar’s website at the end of each quarter-end month. Target weights of
the constituents are not otherwise adjusted between quarters except in the event
of certain types of corporate actions.
Morningstar
may delay or change a scheduled rebalancing or reconstitution of the Wide Moat
Focus Index or the implementation of certain rules at its sole
discretion.
The
Sentiment Leaders Index is designed to track the performance of a subset of U.S.
companies which are selected by analyzing data from online sources to identify
those companies which rank highest in terms of bullish perception and breadth of
discussion. BUZZ Holdings determines insight scores for constituents based on
content aggregated from online sources selected by BUZZ Holdings. Insight scores
can be positive or negative. The 75 companies with the highest “positive
insight” scores, which meet certain market capitalization and average daily
trading volume requirements, as outlined below, will be selected for inclusion
in the Sentiment Leaders Index and will be weighted based on a proprietary
scoring model. Should fewer than 75 constituents have positive insight scores,
BUZZ Holdings will include in the Sentiment Leaders Index all companies that
exhibit positive insight scores and those companies that exhibit the least
negative insight scores until 75 constituents are identified for inclusion in
the Sentiment Leaders Index.
In
constructing the Sentiment Leaders Index, BUZZ Holdings uses a proprietary,
quantitative rules-driven methodology to select 75 equity
securities.
To
qualify as an eligible constituent of the Sentiment Leaders Index, companies
must satisfy the following criteria:
a.Security
must be an equity security traded on a major U.S. exchange (over-the-counter
securities are ineligible for inclusion in the Sentiment Leaders
Index);
b.Security
must have a minimum market capitalization of at least $5 billion;
c.Security
must have a 3-month minimum average daily trading volume of at least $1 million;
and
d.All
equity securities meeting the above criteria and satisfying the minimum number
of “mentions” requirement are selected for inclusion in the universe. “Mentions”
are defined as investment-related posts from relevant online sources which may
include news articles, blog posts, social media or other online discussion
forums which are classified as relevant for analysis. The minimum number of
“mentions” requirement threshold is based on a proprietary scoring methodology
and incorporates a review of a rolling four quarters of data within the
analysis.
No
single constituent may comprise more than 3% weight in the Sentiment Leaders
Index. Any weight in excess of 3% will be truncated and then prorated among the
rest of the securities in the Sentiment Leaders Index during the rebalance. The
Sentiment Leaders Index is reconstituted and rebalanced monthly. The Sentiment
Leaders Index may be adjusted for intra-rebalance corporate actions in order to
maintain continuity and composition. These adjustments take place in reaction to
events that occur with respect to particular constituents and are designed to
mitigate or eliminate the effect of those events on the performance of the
Sentiment Leaders Index.
To
reduce Sentiment Leaders Index turnover and enhance stability, BUZZ Holdings
applies a buffer rule at each rebalance date whereby current constituents that
rank in position 76 to 80 will remain in the Sentiment Leaders Index at the time
of reconstitution and those that rank outside the top 80 companies are excluded
from the Sentiment Leaders Index.
The
Sentiment Leaders Index is calculated and maintained by Solactive AG on behalf
of BUZZ Holdings.
BUZZ
Holdings may delay or change a scheduled rebalancing or reconstitution of the
Sentiment Leaders Index or the implementation of certain rules at its sole
discretion.
The
Adviser has entered into licensing agreements with Morningstar to use the
Morningstar®
US Dividend Valuation IndexSM,
Morningstar®
US
Sustainability Moat Focus IndexSM,
Morningstar®
Global Wide Moat Focus IndexSM,
Morningstar®
Global ex-US Moat Focus IndexSM,
Morningstar®
US
Small-Mid Cap Moat Focus IndexSM
and Morningstar®
Wide Moat Focus IndexSM
(together,
the "Morningstar Indexes"). The VanEck Durable High Dividend ETF, VanEck
Morningstar ESG Moat ETF, VanEck Morningstar Global Wide Moat ETF, VanEck
Morningstar International Moat ETF, VanEck
Morningstar SMID Moat ETF
and VanEck Morningstar Wide Moat ETF (together, the "Morningstar Index ETFs")
are entitled to use the Morningstar Indexes pursuant to their sub-licensing
arrangement with the Adviser.
The
Morningstar Index ETFs are not sponsored, endorsed, sold or promoted by
Morningstar. Morningstar makes no representation or warranty, express or
implied, to the shareholders of the Morningstar Index ETFs or any member of the
public regarding the advisability of investing in securities generally or in the
Morningstar Index ETFs in particular or the ability of the Morningstar Indexes
to track general stock market performance. Morningstar’s only relationship to
the Adviser is the licensing of certain service marks and service names of
Morningstar and of the Morningstar Indexes, which are determined, composed and
calculated by Morningstar without regard to the Adviser or the Morningstar Index
ETFs. Morningstar has no obligation to take the needs of the Adviser or the
shareholders of the Morningstar Index ETFs into consideration in determining,
composing or calculating the Morningstar Indexes. Morningstar is not responsible
for and has not participated in the determination of the prices and amount of
the Morningstar Index ETFs or the timing of the issuance or sale of the
Morningstar Index ETFs or in the determination or calculation of the equation by
which the Morningstar Index ETFs are converted into cash. Morningstar has no
obligation or liability in connection with the administration, marketing or
trading of the Morningstar Index ETFs.
MORNINGSTAR
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE MORNINGSTAR
INDEXES OR ANY DATA INCLUDED THEREIN AND MORNINGSTAR SHALL HAVE NO LIABILITY FOR
ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. MORNINGSTAR MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER, SHAREHOLDERS OF
THE MORNINGSTAR INDEX ETFS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
MORNINGSTAR INDEXES OR ANY DATA INCLUDED THEREIN. MORNINGSTAR MAKES NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE MORNINGSTAR
INDEXES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN
NO EVENT SHALL MORNINGSTAR HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
The
Adviser has entered into a licensing agreement with Ned Davis Research, Inc. to
use the NDR CMG Index. The VanEck Long/Flat Trend ETF is entitled to use the NDR
CMG Index pursuant to a sub-licensing agreement with the Adviser. “Ned Davis
Research CMG US Large Cap Long/Flat Index,” “Ned Davis Research,” “Ned Davis,”
and “NDR” are trademarks of NDR, and “CMG” and “CMG Capital Management Group”
are trademarks of CMG. VanEck Long/Flat Trend ETF is based on Ned Davis Research
CMG US Large Cap Long/Flat Index and is not issued, sponsored, endorsed, sold,
promoted or advised by Ned Davis Research, Inc., CMG Capital Management Group,
or their affiliates.
Ned
Davis Research, Inc. and CMG Capital Management Group make no representation or
warranty, expressed or implied, regarding whether VanEck Long/Flat Trend ETF is
suitable for investors generally or the advisability of trading in such product.
Ned Davis Research, Inc. and CMG Capital Management Group do not guarantee that
the NDR CMG Index referenced by the VanEck Long/Flat Trend ETF has been
accurately calculated or that the NDR CMG Index appropriately represents a
particular investment strategy. The NDR CMG Index is heavily dependent on
quantitative models and data from one or more third parties, and there is no
guarantee that these models will perform as expected. While the NDR CMG Index is
designed to reduce risk from adverse market conditions, there is a risk that
actual performance could be worse than a buy-and-hold strategy. Ned Davis
Research, Inc., CMG Capital Management Group, and their affiliates shall not
have any liability for any error in the NDR CMG Index calculation or for any
infirmity in the VanEck Long/Flat Trend ETF.
NEITHER
NDR NOR CMG GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE NDR CMG INDEX
OR ANY DATA INCLUDED THEREIN AND NEITHER NDR NOR CMG SHALL HAVE ANY LIABILITY
WHATSOEVER FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. NDR AND CMG MAKE
NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE,
OWNERS OF THE VANECK LONG/FLAT TREND ETF, OR ANY OTHER PERSON OR ENTITY FROM THE
USE OF THE NDR CMG INDEX OR ANY DATA INCLUDED THEREIN. NDR AND CMG MAKE NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
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(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
The
NDR CMG Index is the property of NDR., which has contracted with S&P Opco,
LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain
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& Poor’s Financial Services LLC and Dow Jones Trademark Holdings LLC
(collectively,“S&P Dow Jones Indices”). S&P Dow Jones Indices will not
be liable for any errors or omissions in calculating the NDR CMG
Index.“Calculated by S&P Dow Jones Indices” and the related stylized mark(s)
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and
have been licensed for use by NDR. S&P®
is
a registered trademark of Standard & Poor’s Financial Services LLC, and Dow
Jones®
is a registered trademark of Dow Jones Trademark Holdings LLC.
The
VanEck Long/Flat Trend ETF based on the NDR CMG Index is not sponsored,
endorsed, sold or promoted by S&P Dow Jones Indices. S&P Dow Jones
Indices does not make any representation or warranty, express or implied, to the
owners of the VanEck Long/Flat Trend ETF or any member of the public regarding
the advisability of investing in securities generally or in the NDR CMG Index or
the VanEck Long/Flat Trend ETF particularly or the ability of the NDR CMG Index
or the VanEck Long/Flat Trend ETF to track general market performance. S&P
Dow Jones Indices’ only relationship to Ned Davis Research, Inc. with respect to
the NDR CMG Index is the licensing of the S&P 500 Index, certain trademarks,
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the calculation services on behalf of Ned Davis Research, Inc. related to the
NDR CMG Index without regard to Ned Davis Research, Inc. or the VanEck Long/Flat
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participated in the creation of the VanEck Long/Flat Trend ETF, the
determination of the prices and amount of the VanEck Long/Flat Trend ETF or the
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The
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their third party licensors make any representation or warranty, express or
implied, as to the ability of any index to accurately represent the asset class
or market sector that it purports to represent and neither S&P Dow Jones
Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third
party licensors shall have any liability for any errors, omissions, or
interruptions of any index or the data included therein.
The
Adviser has entered into a licensing agreement with BUZZ Holdings to use the
Sentiment Leaders Index. The Fund is entitled to use the Sentiment Leaders Index
pursuant to a sub-licensing arrangement with the Adviser.
The
Sentiment Leaders Index is a product of BUZZ Holdings, and has been licensed to
the Adviser for use in connection with the VanEck Social Sentiment ETF.
VanEck
Social Sentiment ETF is not sponsored, endorsed, sold or promoted by BUZZ
Holdings, or its shareholders, or the licensor of the Sentiment Leaders Index
and/or its affiliates and third party licensors. BUZZ Holdings makes no
representation or warranty, express or implied, to the owners of the VanEck
Social Sentiment ETF or any member of the public regarding the advisability of
investing in securities generally or in VanEck Social Sentiment ETF
particularly, or the ability of the Sentiment Leaders Index to track general
market performance.
BUZZ
Holdings’ only relationship to the Adviser with respect to the Sentiment Leaders
Index is the licensing of the Sentiment Leaders Index and certain trademarks of
BUZZ Holdings. The BUZZ indices are determined and composed by BUZZ Holdings
without regard to the Adviser or the VanEck Social Sentiment ETF. BUZZ Holdings
has no obligation to take the needs of the Adviser or the owners of VanEck
Social Sentiment ETF into consideration in determining and composing the
Sentiment Leaders Index.
BUZZ
Holdings are not responsible for and have not participated in the determination
of the prices of VanEck Social Sentiment ETF or the timing of the issuance or
sale of securities of VanEck Social Sentiment ETF or in the determination or
calculation of the equation by which VanEck Social Sentiment ETF securities may
be converted into cash, surrendered, or redeemed, as the case may be. BUZZ
Holdings have no obligation or liability in connection with the administration,
marketing or trading of VanEck Social Sentiment ETF. There is no assurance that
investment products based on the Sentiment Leaders Index will accurately track
index performance or provide positive investment returns.
BUZZ
Holdings is not responsible for fulfilling the legal requirements concerning the
accuracy and completeness of the Fund’s Prospectus.
BUZZ
Holdings is not an investment advisor and the inclusion of a security in the
Sentiment Leaders Index is not a recommendation by BUZZ Holdings to buy, sell,
or hold such security, nor should it be considered investment advice.
BUZZ
HOLDINGS DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE
COMPLETENESS OF THE SENTIMENT LEADERS INDEX OR ANY DATA RELATED THERETO OR ANY
COMMUNICATION WITH RESPECT THERETO, INCLUDING BUT NOT LIMITED TO, ORAL OR
WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS). BUZZ HOLDINGS SHALL
NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. BUZZ HOLDINGS MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE OR AS TO RESULTS TO BE OBTAINED BY VAN ECK ASSOCIATES CORPORATION, OWNERS
OF THE VANECK SOCIAL SENTIMENT ETF, OR ANY OTHER PERSON OR ENTITY FROM THE USE
OF THE SENTIMENT LEADERS INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL BUZZ
HOLDINGS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING
LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN
BUZZ HOLDINGS AND VAN ECK ASSOCIATES CORPORATION, OTHER THAN THE LICENSORS OF
BUZZ HOLDINGS.
The
Fund is not sponsored, promoted, sold or supported in any other manner by
Solactive AG nor does Solactive AG offer any express or implicit guarantee or
assurance either with regard to the results of using the Sentiment Leaders Index
and/or its trade mark or its price at any time or in any other respect. The
Sentiment Leaders Index is calculated and maintained by Solactive AG. Solactive
AG uses its best efforts to ensure that the Sentiment Leaders Index is
calculated correctly. Irrespective of its obligations towards BUZZ Holdings,
Solactive AG has no obligation to point out errors in the Sentiment Leaders
Index to third parties including but not limited to investors and/or financial
intermediaries of the Fund. Neither the publication of the Sentiment Leaders
Index by Solactive AG nor the licensing of the Sentiment Leaders Index or its
trade marks for the purpose of use in connection with the Fund constitutes a
recommendation by Solactive AG to invest capital in the Fund nor does it in any
way represent an assurance or opinion of Solactive AG with regard to any
investment in the Fund. Solactive AG is not responsible for fulfilling the legal
requirements concerning the accuracy and completeness of the Fund’s
Prospectus.
The
financial highlights tables which follow are intended to help you understand the
Funds’ financial performance for the past five years or as indicated. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in a Fund (assuming reinvestment of all dividends and
distributions). The information for the fiscal year ended September 30, 2022 has
been audited by PricewaterhouseCoopers LLP, the Trust's independent registered
public accounting firm, whose report, along with the Funds' financial
statements, is included in the Funds' Annual Report, which is available upon
request. The information for periods prior to the fiscal year ended September
30, 2022 was audited by another independent registered public accounting firm.
The Morningstar SMID Moat ETF commenced operations on October 4, 2022 and,
therefore, financial highlights are not available for the Fund.
For
a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Durable
High Dividend ETF |
|
Year
Ended September 30, |
|
Period
Ended September 30, 2019(a) |
|
2022 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of period |
$ |
30.59 |
|
|
$ |
26.78 |
|
|
$ |
28.24 |
|
|
|
$ |
25.36 |
|
|
Net
investment income (b) |
0.99 |
|
|
1.01 |
|
|
0.92 |
|
|
|
0.75 |
|
|
Net
realized and unrealized gain (loss) on investments |
(2.90) |
|
|
3.71 |
|
|
(1.28) |
|
|
|
2.62 |
|
|
Total
from investment operations |
(1.91) |
|
|
4.72 |
|
|
(0.36) |
|
|
|
3.37 |
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
Net
investment income |
(0.96) |
|
|
(0.91) |
|
|
(0.90) |
|
|
|
(0.49) |
|
|
Net
realized capital gains |
— |
|
|
— |
|
|
(0.20) |
|
|
|
— |
|
|
Total
distributions |
(0.96) |
|
|
(0.91) |
|
|
(1.10) |
|
|
|
(0.49) |
|
|
Net
asset value, end of period |
$ |
27.72 |
|
|
$ |
30.59 |
|
|
$ |
26.78 |
|
|
|
$ |
28.24 |
|
|
Total
return (c) |
(6.58) |
|
% |
17.89 |
|
% |
(1.26) |
|
% |
|
13.41 |
|
%(d) |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
Gross
expenses (e) |
0.29 |
|
% |
0.53 |
|
% |
0.73 |
|
% |
|
1.14 |
|
%(f) |
Net
expenses (e) |
0.29 |
|
% |
0.29 |
|
% |
0.29 |
|
% |
|
0.29 |
|
%(f) |
Net
investment income |
3.19 |
|
% |
3.38 |
|
% |
3.44 |
|
% |
|
3.00 |
|
%(f) |
Supplemental
data |
|
|
|
|
|
|
|
|
|
Net
assets, end of period (in millions) |
$ |
73 |
|
|
$ |
51 |
|
|
$ |
33 |
|
|
|
$ |
18 |
|
|
Portfolio
turnover rate (g) |
50 |
|
% |
50 |
|
% |
67 |
|
% |
|
94 |
|
%(d) |
|
|
|
|
|
|
|
|
|
|
(a)For
the period October 30, 2018 (commencement of operations) through September 30,
2019.
(b)Calculated
based upon average shares outstanding
(c)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d)Not
Annualized
(e)Periods
after September 30, 2021 reflect a unitary management fee structure.
(f)Annualized
(g)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long/Flat
Trend ETF |
|
Year
Ended September 30, |
|
Period
Ended September 30, 2018(a) |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
|
Net
asset value, beginning of period |
$ |
39.96 |
|
|
$ |
31.55 |
|
|
$ |
28.02 |
|
|
$ |
28.24 |
|
|
|
$ |
25.03 |
|
|
Net
investment income (b) |
0.24 |
|
|
0.34 |
|
|
0.40 |
|
|
0.39 |
|
|
|
0.42 |
|
|
Net
realized and unrealized gain (loss) on investments |
(6.46) |
|
|
8.78 |
|
|
3.56 |
|
(c) |
(0.35) |
|
|
|
2.89 |
|
|
Total
from investment operations |
(6.22) |
|
|
9.12 |
|
|
3.96 |
|
|
0.04 |
|
|
|
3.31 |
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
(0.16) |
|
|
(0.71) |
|
|
(0.43) |
|
|
(0.26) |
|
|
|
(0.10) |
|
|
Net
asset value, end of period |
$ |
33.58 |
|
|
$ |
39.96 |
|
|
$ |
31.55 |
|
|
$ |
28.02 |
|
|
|
$ |
28.24 |
|
|
Total
return (d) |
(15.67) |
|
% |
29.29 |
|
% |
14.22 |
|
% |
0.29 |
|
% |
|
13.25 |
|
%(e) |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
Gross
expenses (f) |
0.72 |
|
% |
0.82 |
|
% |
0.76 |
|
% |
0.69 |
|
% |
|
0.86 |
|
%(g) |
Net
expenses (f) |
0.59 |
|
% |
0.55 |
|
% |
0.55 |
|
% |
0.57 |
|
% |
|
0.56 |
|
%(g) |
Net
expenses excluding interest and taxes (f) |
0.55 |
|
% |
0.55 |
|
% |
0.55 |
|
% |
0.55 |
|
% |
|
0.55 |
|
%(g) |
Net
investment income (f) |
0.60 |
|
% |
0.91 |
|
% |
1.38 |
|
% |
1.47 |
|
% |
|
1.58 |
|
%(g) |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (in millions) |
$ |
34 |
|
|
$ |
41 |
|
|
$ |
32 |
|
|
$ |
66 |
|
|
|
$ |
52 |
|
|
Portfolio
turnover rate (h) |
243 |
|
% |
1 |
% |
0 |
% |
59 |
|
% |
|
28 |
|
%(e) |
|
|
|
|
|
|
|
|
|
|
|
|
(a)For
the period October 4, 2017 (commencement of operations) through September 30,
2018.
(b)Calculated
based upon average shares outstanding
(c)The
amount shown does not correspond with the aggregate net gain (loss) on
investments for the period due to the timing of sales and repurchase of shares
in relation to fluctuating market values of the investments of the
Fund.
(d)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(e)Not
Annualized
(f)The
ratios presented do not reflect the Fund’s proportionate share of income and
expenses from the Fund’s investment in underlying funds.
(g)Annualized
(h)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
Morningstar
ESG Moat ETF |
|
Period
Ended September 30, 2022(a) |
|
|
|
|
Net
asset value, beginning of period |
$ |
25.05 |
|
|
Net
investment income (b) |
0.25 |
|
|
Net
realized and unrealized loss on investments |
(5.32) |
|
|
Total
from investment operations |
(5.07) |
|
|
Distributions
from: |
|
|
Net
investment income |
(0.05) |
|
|
Net
asset value, end of period |
$ |
19.93 |
|
|
Total
return (c) |
(20.30) |
|
%(d) |
Ratios
to average net assets |
|
|
Gross
expenses |
4.24 |
|
%(e) |
Net
expenses |
0.49 |
|
%(e) |
Net
investment income |
1.06 |
|
%(e) |
Supplemental
data |
|
|
Net
assets, end of period (in millions) |
$ |
2 |
|
|
Portfolio
turnover rate (f) |
44 |
|
%(d) |
|
|
|
(a)For
the period October 6, 2021 (commencement of operations) through September 30,
2022.
(b)Calculated
based upon average shares outstanding
(c)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d)Not
Annualized
(e)Annualized
(f)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
a share outstanding throughout each period: |
|
Morningstar
Global Wide Moat ETF |
|
Year
Ended September 30, |
|
Period
Ended September 30, 2019(a) |
|
2022 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of period |
$ |
38.42 |
|
|
$ |
32.17 |
|
|
$ |
28.97 |
|
|
|
$ |
25.30 |
|
|
Net
investment income (b) |
0.63 |
|
|
0.54 |
|
|
0.46 |
|
|
|
0.47 |
|
|
Net
realized and unrealized gain (loss) on investments |
(7.60) |
|
|
6.74 |
|
|
3.47 |
|
|
|
3.31 |
|
|
Total
from investment operations |
(6.97) |
|
|
7.28 |
|
|
3.93 |
|
|
|
3.78 |
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
Net
investment income |
(0.55) |
|
|
(0.43) |
|
|
(0.34) |
|
|
|
(0.11) |
|
|
Net
realized capital gains |
(1.66) |
|
|
(0.60) |
|
|
(0.39) |
|
|
|
— |
|
|
Total
distributions |
(2.21) |
|
|
(1.03) |
|
|
(0.73) |
|
|
|
(0.11) |
|
|
Net
asset value, end of period |
$ |
29.24 |
|
|
$ |
38.42 |
|
|
$ |
32.17 |
|
|
|
$ |
28.97 |
|
|
Total
return (c) |
(19.41) |
|
% |
22.99 |
|
% |
13.70 |
|
% |
|
15.01 |
|
%(d) |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
Gross
expenses |
0.96 |
|
% |
1.20 |
|
% |
2.04 |
|
% |
|
2.50 |
|
%(e) |
Net
expenses |
0.52 |
|
% |
0.52 |
|
% |
0.52 |
|
% |
|
0.56 |
|
%(e) |
Net
expenses excluding interest and taxes |
0.52 |
|
% |
0.52 |
|
% |
0.52 |
|
% |
|
0.52 |
|
%(e) |
Net
investment income |
1.76 |
|
% |
1.44 |
|
% |
1.54 |
|
% |
|
1.86 |
|
%(e) |
Supplemental
data |
|
|
|
|
|
|
|
|
|
Net
assets, end of period (in millions) |
$ |
18 |
|
|
$ |
19 |
|
|
$ |
10 |
|
|
|
$ |
6 |
|
|
Portfolio
turnover rate (f) |
67 |
|
% |
74 |
|
% |
68 |
|
% |
|
71 |
|
%(d) |
|
|
|
|
|
|
|
|
|
|
(a)For
the period October 30, 2018 (commencement of operations) through September 30,
2019.
(b)Calculated
based upon average shares outstanding
(c)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d)Not
Annualized
(e)Annualized
(f)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morningstar
International Moat ETF |
|
Year
Ended September 30, |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of year |
$ |
33.54 |
|
|
$ |
29.38 |
|
|
$ |
30.57 |
|
|
$ |
33.13 |
|
|
$ |
35.49 |
|
|
Net
investment income (a) |
1.34 |
|
|
1.07 |
|
|
0.62 |
|
|
1.00 |
|
|
0.91 |
|
|
Net
realized and unrealized gain (loss) on investments |
(8.28) |
|
|
3.81 |
|
|
(0.56) |
|
|
(2.50) |
|
|
(1.27) |
|
|
Total
from investment operations |
(6.94) |
|
|
4.88 |
|
|
0.06 |
|
|
(1.50) |
|
|
(0.36) |
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
Net
investment income |
(1.50) |
|
|
(0.72) |
|
|
(1.25) |
|
|
(1.06) |
|
|
(0.98) |
|
|
Net
realized capital gains |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1.02) |
|
|
Total
distributions |
(1.50) |
|
|
(0.72) |
|
|
(1.25) |
|
|
(1.06) |
|
|
(2.00) |
|
|
Net
asset value, end of year |
$ |
25.10 |
|
|
$ |
33.54 |
|
|
$ |
29.38 |
|
|
$ |
30.57 |
|
|
$ |
33.13 |
|
|
Total
return (b) |
(21.65) |
|
% |
16.64 |
|
% |
(0.14) |
|
% |
(4.25) |
|
% |
(1.14) |
|
% |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
Gross
expenses |
0.67 |
|
% |
0.76 |
|
% |
0.76 |
|
% |
0.69 |
|
% |
0.72 |
|
% |
Net
expenses |
0.58 |
|
% |
0.57 |
|
% |
0.58 |
|
% |
0.57 |
|
% |
0.57 |
|
% |
Net
expenses excluding interest and taxes |
0.56 |
% |
0.56 |
% |
0.56 |
|
% |
0.56 |
|
% |
0.56 |
|
% |
Net
investment income |
4.32 |
|
% |
3.09 |
|
% |
2.10 |
|
% |
3.26 |
|
% |
2.67 |
|
% |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (in millions) |
$ |
67 |
|
|
$ |
70 |
|
|
$ |
51 |
|
|
$ |
83 |
|
|
$ |
89 |
|
|
Portfolio
turnover rate (c) |
105 |
|
% |
110 |
|
% |
94 |
|
% |
85 |
|
% |
112 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
(a)Calculated
based upon average shares outstanding
(b)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morningstar
Wide Moat ETF |
|
Year
Ended September 30, |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of year |
$ |
73.28 |
|
|
$ |
54.63 |
|
|
$ |
50.13 |
|
|
$ |
46.73 |
|
|
$ |
40.33 |
|
|
Net
investment income (a) |
0.85 |
|
|
0.96 |
|
|
0.92 |
|
|
0.89 |
|
|
0.73 |
|
|
Net
realized and unrealized gain (loss) on investments |
(13.33) |
|
|
18.59 |
|
|
4.30 |
|
|
3.25 |
|
|
6.13 |
|
|
Total
from investment operations |
(12.48) |
|
|
19.55 |
|
|
5.22 |
|
|
4.14 |
|
|
6.86 |
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
Net
investment income |
(0.82) |
|
|
(0.90) |
|
|
(0.72) |
|
|
(0.74) |
|
|
(0.46) |
|
|
Net
asset value, end of year |
$ |
59.98 |
|
|
$ |
73.28 |
|
|
$ |
54.63 |
|
|
$ |
50.13 |
|
|
$ |
46.73 |
|
|
Total
return (b) |
(17.27) |
|
% |
36.11 |
|
% |
10.40 |
|
% |
9.21 |
|
% |
17.11 |
|
% |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
Expenses |
0.46 |
|
% |
0.46 |
|
% |
0.47 |
|
% |
0.48 |
|
% |
0.49 |
|
% |
Net
investment income |
1.20 |
|
% |
1.40 |
|
% |
1.77 |
|
% |
1.90 |
|
% |
1.69 |
|
% |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (in millions) |
$ |
5,866 |
|
|
$ |
6,599 |
|
|
$ |
3,398 |
|
|
$ |
2,486 |
|
|
$ |
1,570 |
|
|
Portfolio
turnover rate (c) |
51 |
|
% |
47 |
|
% |
48 |
|
% |
58 |
|
% |
56 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
(a)Calculated
based upon average shares outstanding
(b)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social
Sentiment ETF |
|
Year
Ended September 30, 2022 |
|
Period
Ended September 30, 2021(a) |
|
|
|
|
|
|
|
|
Net
asset value, beginning of period |
$ |
24.66 |
|
|
|
$ |
25.00 |
|
|
Net
investment income (loss) (b) |
0.02 |
|
|
|
(0.03) |
|
|
Net
realized and unrealized loss on investments |
(11.94) |
|
|
|
(0.31) |
|
(c) |
Total
from investment operations |
(11.92) |
|
|
|
(0.34) |
|
|
Net
asset value, end of period |
$ |
12.74 |
|
|
|
$ |
24.66 |
|
|
Total
return (d) |
(48.34) |
|
% |
|
(1.38) |
|
%(e) |
Ratios
to average net assets |
|
|
|
|
|
Gross
expenses |
1.16 |
|
% |
|
0.75 |
|
%(f) |
Net
expenses |
0.75 |
|
% |
|
0.75 |
|
%(f) |
Net
investment income (loss) |
0.11 |
|
% |
|
(0.20) |
|
%(f) |
Supplemental
data |
|
|
|
|
|
Net
assets, end of period (in millions) |
$ |
58 |
|
|
|
$ |
193 |
|
|
Portfolio
turnover rate (g) |
263 |
|
% |
|
161 |
|
%(e) |
|
|
|
|
|
|
(a)For
the period March 3, 2021 (commencement of operations) through September 30,
2021.
(b)Calculated
based upon average shares outstanding
(c)The
amount shown does not correspond with the aggregate net gain (loss) on
investments for the period due to the timing of sales and repurchase of shares
in relation to fluctuating market values of the investments of the
Fund.
(d)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(e)Not
Annualized
(f)Annualized
(g)Portfolio
turnover rate excludes in-kind transactions.
Information
regarding how often the closing trading price of the Shares of each Fund was
above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV of the Fund for the most recently completed calendar year
and the most recently completed calendar quarter(s) since that year (or the life
of the Fund, if shorter) can be found at www.vaneck.com.
CONTINUOUS
OFFERING
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Trust on an ongoing basis, a “distribution,” as such term is used in the
Securities Act, may occur at any point. Broker dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker
dealers who are not “underwriters” but are participating in a distribution (as
contrasted to ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the Investment Company Act of 1940. As a result, broker dealer
firms should note that dealers who are not underwriters but are participating in
a distribution (as contrasted with ordinary secondary market transactions) and
thus dealing with the Shares that are part of an overallotment within the
meaning of Section 4(a)(3)(A) of the Securities Act would be unable to take
advantage of the prospectus delivery exemption provided by Section 4(a)(3) of
the Securities Act. Firms that incur a prospectus delivery obligation with
respect to Shares are reminded that, under Rule 153 of the Securities Act, a
prospectus delivery obligation under Section 5(b)(2) of the Securities Act owed
to an exchange member in connection with a sale on the Exchange is satisfied by
the fact that the prospectus is available at the Exchange upon request. The
prospectus delivery mechanism provided in Rule 153 is only available with
respect to transactions on an exchange.
In
addition, certain affiliates of the Funds and the Adviser may purchase and
resell Fund shares pursuant to this Prospectus.
OTHER
INFORMATION
The
Trust was organized as a Delaware statutory trust on March 15, 2001. Its
Declaration of Trust currently permits the Trust to issue an unlimited number of
Shares of beneficial interest. If shareholders are required to vote on any
matters, each Share outstanding would be entitled to one vote. Annual meetings
of shareholders will not be held except as required by the Investment Company
Act of 1940 and other applicable law. See the Funds’ SAI for more information
concerning the Trust’s form of organization. Section 12(d)(1) of the Investment
Company Act of 1940 restricts investments by investment companies in the
securities of other investment companies, including Shares of a Fund. Registered
investment companies are permitted to invest in the Funds (except VanEck
Long/Flat Trend ETF) beyond the limits set forth in Section 12(d)(1) subject to
certain terms and conditions set forth in SEC regulations, including that such
investment companies enter into an agreement with such Fund.
The
Prospectus, SAI and any other Fund communication do not create any contractual
obligations between the Funds’ shareholders and the Trust, the Funds, the
Adviser and/or the Trustees. Further, shareholders are not intended third-party
beneficiaries of any contracts entered into by (or on behalf of) any Fund,
including contracts with the Adviser or other parties who provide services to
the Funds.
Dechert
LLP serves as counsel to the Trust, including the Funds. PricewaterhouseCoopers
LLP serves as the Trust’s independent registered public accounting firm and
audits the Fund’s financial statements annually.
ADDITIONAL
INFORMATION
This
Prospectus does not contain all the information included in the Registration
Statement filed with the SEC with respect to the Funds’ Shares. The Funds’
Registration Statement, including this Prospectus, the Funds’ SAI and the
exhibits are available on the EDGAR database at the SEC’s website
(http://www.sec.gov), and copies may be obtained, after paying a duplicating
fee, by electronic request at the following email address: [email protected].
The
SAI for the Funds, which has been filed with the SEC, provides more information
about the Funds. The SAI for the Funds is incorporated herein by reference and
is legally part of this Prospectus. Additional information about the Funds’
investments is available in each Fund’s annual and semi-annual reports to
shareholders. In each Fund’s annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund’s performance during its last fiscal year. The SAI and the Funds’ annual
and semi-annual reports may be obtained without charge by writing to the Funds
at Van Eck Securities Corporation, the Funds’ Distributor, at 666 Third Avenue,
9th Floor, New York, New York 10017 or by calling the Distributor at the
following number: Investor Information: 800.826.2333.
Shareholder
inquiries may be directed to the Funds in writing to 666 Third Avenue, 9th
Floor, New York, New York 10017 or by calling 800.826.2333.
The
Funds’ SAI is available at www.vaneck.com.
(Investment
Company Act file no. 811-10325)
For
more detailed information about the Funds, see the SAI dated February 1, 2023,
as may be supplemented from time to time. Additional information about the
Funds’ investments is, or will be, available in each Fund’s annual and
semi-annual reports to shareholders. In each Fund’s annual report, you will find
a discussion of the market conditions and investment strategies that
significantly affected the Fund’s performance during its last fiscal
year.
Call
VanEck at 800.826.2333 to request, free of charge, the annual or semi-annual
reports, the SAI, or other information about the Funds or to make shareholder
inquiries. You may also obtain the SAI or a Fund’s annual or semi-annual reports
by visiting the VanEck website at www.vaneck.com.
Reports
and other information about the Funds are available on the EDGAR Database on the
SEC’s internet site at http://www.sec.gov. In addition, copies of this
information may be obtained, after paying a duplicating fee, by electronic
request at the following email address: [email protected].
|
|
|
|
|
|
|
|
Transfer
Agent: State Street Bank and Trust Company SEC Registration Number:
333-123257 1940 Act Registration Number: 811-10325 |
800.826.2333 vaneck.com |
STRATPRO |